What is fud in crypto: explanation of cryptocurrency slang

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We analyze the meaning of the word FUD in the world of cryptocurrencies, giving illustrative examples. Why is this an important concept which influences the market, and how does it affect traders? Read the article to find out.

What is FUD in the crypto market?

Cryptocurrencies have become a separate broad industry with their own rules, terms, and slang expressions. FUD is one of the most important concepts that can manage the market and influence traders’ decisions.

It stands for “fear, uncertainty, and doubts”. Sometimes the word is used in the meaning of “Facts U Dislike”.

The term is used when news of a negative or controversial nature appears in the market. This news is unverified, misrepresented, based on the opinions of certain individuals, and may not affect the cryptocurrency industry in the long term. However, many people are influenced by fear, uncertainty, and doubt, which can lead to the spread of FUD, market drawdowns, and massive sales.

Sometimes advanced investors use FUD to intentionally lower the price of a promising asset and purchase it at a minimal cost. FUD is also often inflated by skeptics of digital assets.

Thus, FUD is a word to describe a psychological attack that intentionally or unintentionally appeals to negative emotions and causes market participants to make unreasonable decisions that affect the crypto space or certain assets. As a rule, long-term traders ignore dubious news and continue implementing their HODL strategy.

FUD is closely related to the psychological features of human nature, which tends to exaggerate pessimistic news, as well as the habit of some media of creating flashy headlines. Nevertheless, in some cases, there are serious market threats. We need to distinguish between baseless fud and warnings, which do not propagate panic and doubt but state the facts. This requires checking the information and the source, developing critical thinking, and researching historical data.

Why does FUD appear?

There can be a variety of reasons for fear in the market. On a global level, it can be caused by a falling economy, recession, pandemics, cataclysms, etc. Negative statements by experts, pessimistic opinions of industry leaders can also cause negative emotions, expressed in the slang term FUD. 

In specific cases, it results from unsatisfactory company reports and suspicious manipulation by its founders. FUD can be triggered by an influential investor's short position in the market. In addition, fear appears amid a decline in quotations or a major bearish trend.

The more catastrophic the consequences and the more uncertainty about the future of digital assets, the easier it is to be hesitant about investing in the crypto sector.

The unjustified FUD appears when the media take a phrase out of context and present it in a way that benefits them. It makes a lot of buzz, and for some traders, it may become a signal to sell.

Examples of FUD

In the young history of cryptocurrencies, there are hundreds of examples of fear and uncertainty spreading among traders. Let’s look at a few of the classical ones.

China bans Bitcoin

A telling example of baseless fear mongering. Such headlines have appeared constantly in the media since cryptocurrency emerged, but in reality, behind them are restrictions on individual organizations or empty words that do not convert into action. Many memes and discussions have been created in the cryptocurrency community on this basis.

However, in 2021, China banned mining, which led to a decline in sentiment, but the market recovered quickly from this event.

Crypto skeptics’ statements: Donald Trump

Facebook’s Libra cryptocurrency was a hot topic of controversy in 2020. The newsbreak was the reason for Donald Trump’s statement about digital assets. The former U.S. president shared his opinion about bitcoin and the crypto sphere in general on Twitter, saying that he is not a fan of them as their price is volatile and taken out of the air. Trump also noted that digital assets could be used for illegal activities because of the lack of regulation.

Bitcoin is dangerous for the planet

Another example of FUD is the argument that bitcoin requires too many energy sources to function, harming the environment.

However, it does not consider the fact that most of the energy used for mining is renewable. While the banking, transportation, construction, and even healthcare industries use more energy overall than the maintenance of the blockchain.

Strict regulation of cryptocurrencies

Conversations about strict regulatory laws, limitations, and state-level aversion to cryptocurrencies occasionally make people feel fear and doubt about their investments. This narrative will continue for years until digital assets become commonplace and most countries develop a regulatory framework for their adoption.

Some states tried to declare cryptocurrencies illegal, representatives of others suggested strict frameworks for their use. All this has frightened traders and will continue to sow uncertainty in the cryptocurrency community.

Positive FUD aspects

Although FUD leads to unpleasant consequences and, in many cases, has no serious justification, you can benefit from it. For example, a savvy speculator can trade on volatility, and a long-term investor can buy assets at a reduced price due to the FUD. As the analysis of historical data shows, after a substantial decrease, quotations sooner or later return to the level observed before the FUD.

If we analyze the situation with the ban on mining in China, we can conclude that it is more positive than negative in the end. After that, BTC mining did become more environmentally friendly.