The cryptocurrency industry, like any other, has a number of specific terms. One of them is FUD, the impact of which on price hikes can hardly be overestimated. What is this attack and how to deal with it?
What is FUD
FUD is an abbreviation of “Fear, Uncertainty and Doubt”, which translates into Russian as “Fear, Uncertainty and Doubt”. As a rule, FUD is understood as any information that is interpreted by investors in a negative way and leads to a bearish trend in the market. But FUD has other interpretations.
Sometimes the term refers to the bearish trend itself, which is the result of skepticism of some major or well-known participants in the crypto industry. Sometimes you can meet a derivative of FUD term FUDsters, which is essentially identical to the Russian cryptoskeptics. It is most often used against those who say that cryptocurrency is dubious, worthless and all that sort of thing.
Although FUD can have different uses, one thing is constant – the term unambiguously carries a negative connotation towards cryptocurrencies: temporary or permanent.
The Impact of FUD on Investors
Most investors, oddly enough, invest on a whim. If everyone approached the issue professionally, they would be rich. And then someone famous says something catchy and everyone runs to sell or buy, depending on what is proclaimed. For example, the notorious Peter Schiff called for bitcoin sales on March 11, 2023.
Surely someone followed the advice due to the charisma and fame of the cryptoskeptic. However, in reality, March 11 was the last day bitcoin traded below $20,000, and its value is above $29,000 on July 26.
The most dangerous thing for inexperienced investors in such cases is to run into a situation where the FUD coincided with the real state of affairs. Then people start to believe: the one who spoke out against cryptocurrencies is really a guru and a prophet, and his mistakes are beyond reality. In reality, the guru was just lucky. Always look at the argumentation, most often imaginary experts do without it.
The impact on the value of cryptocurrencies
FUD first of all sows doubts in the heads of investors. This can subsequently lead to a localized bearish trend. More often in cryptocurrencies with smaller capitalization, but it also happens in large coins.
The clearest example of FUD is the ban by the People’s Bank of China in September 2017 on ICOs in the Middle Kingdom. This caused some excitement among investors, who rushed to close their positions. That eventually led to a decrease in bitcoin quotes in September 2017 by 8.62% (data on the Bitstamp exchange).
Probably those who sold BTC at that time, later regretted it, as only three months later it was worth four times more expensive. But the point is that the negative information led to a one-time sell-off. Although if you think about it, the ban on ICOs in one country is a drop in the ocean for the whole industry. This was proved by the further growth of BTC quotes.
And what is the correct way to interpret FUD when trading cryptocurrency?
The most important thing to do is to do your own analysis: fundamental and technical. You can not rely on the official statements of even very popular personalities. For example, the popular US TV host Jim Cramer has recently often spoken out against cryptocurrencies. At the same time, he himself admitted that at one time made money on bitcoin, and after holding ether. If you know this information about Cramer, you should obviously have questions about the consistency of the statements.
Another example: Warren Buffett (Warren Buffett). The legendary investor believes that cryptocurrencies are not something to invest in. But he had a similar opinion about gold. As a result, his investment company Berkshire Hathaway invested in the shares of Canadian gold miner Barrick Gold.
And although nothing has been heard about Buffett’s investments in cryptocurrencies, it is quite possible to assume that the famous investor will change his mind here as well. In addition, the spread of FUD can often lead to cryptocurrency getting cheaper, and this will provide an opportunity to purchase at more attractive prices. Filter the information you receive. Favor expertise that is based on statistics and facts.
For example, there are analytical portals like Messari, Glassnode, Coinglass and others that support their conclusions with data. Yes, you should not rely entirely on these data. But the opinions of such analysts are much more reasoned than simply stating that bitcoin is worthless. Thus, FUD is negative information regarding cryptocurrencies, which can be based on both real facts and unconfirmed ones.
It can lead to panic among investors and, as a result, to a decrease in the value of individual koins. You should not rely entirely on FUD: you should do your own analysis.