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The crypto market is determined by the rise and fall of supply and demand of the assets. Even though cryptocurrencies have been on the rise ever since they have been in the market, many are still reluctant to invest even after knowing their growing significance in the future.
This is because negative and fake news spreads like wildfire than anything positive. Everything has its positives and negatives, and so does crypto. FUD is an abbreviation that you would have seen while researching crypto. It is a term that emerged as a result of the negative publicity crypto is gaining. Many popular media, celebrities, and economists have contributed to this.
What is FUD?
FUD is the abbreviation for fear, uncertainty, and doubt. This can be easily associated with crypto as many people are still behind the clouds of fear, uncertainty, and doubt while thinking about the concept of digital assets.
In crypto, FUD is the dissemination of negative information or rumors to create a sense of fear, uncertainty, and doubt among investors and traders. It can be physical manipulations or news that disrupts the price and causes crashes in the market.
The value of digital assets is based on their supply and demand and negative publicity reduces the interest of potential investors and traders. Everything looks appealing when its positive side is glorified and here the negative side is being glorified reducing its appeal and leading to a price drop.
What are the causes of FUD?
Market manipulation
Traders can spread negative news to drag down the price, purchase the assets at a lower price, and increase their assets. Market manipulation can make many traders sell their assets in a frenzy which can reduce the cost.
Competition
Different cryptocurrency platforms or projects are aimed at bringing down the reputation of other platforms through negative campaigns that evoke fear, uncertainty, and doubt. This can increase the competition and can gain an advantage over the other platforms.
Legal restrictions
New laws and regulations can cause FUD. Litigation between platforms, newly imposed controls, and taxes can bring down the market. Newly published regulations are aimed at bringing awareness among traders but can be misunderstood.
Traditional financial organizations
Banks or other financial institutions can overlook the growth of crypto and spread FUD to bring down investors investing in crypto and re-establish their supremacy.
Individuals or influencers
People with incomplete knowledge about crypto can unintentionally spread FUD. They may misinterpret news after relying on unauthorized sources and can circulate misinformation.
Also Read: How AI Is Revolutionizing Crypto Options Trading In 2024?
What are the sources of FUD?
Social media
Social media can easily spread everything positive or negative within seconds and cause great thunderstorms. Many popular apps and websites can become the source of misinformation and FUDs as anyone from anywhere can start a news or debate.
News media
Not everyone but people still believe many of the news broadcasted on the news channels are unhinged and take them as they are. Such news can be easily manipulated and cause FUDs among investors.
Personal speculations
People may do their research but end up gaining a negative picture and can cause FUDs based on their findings which may not be true.
Internet forum
Online chat groups and internet forums can start discussions causing FUDs. People can twist information selectively spreading negative possibilities.
How does FUD affect the market?
Volatility
Crypto is already known for its volatile nature. FUD can trigger crypto’s volatile nature. When people start to panic after any of the above-mentioned FUD, they start to sell their assets to reduce risks. High market volatility is an immediate reaction to FUD as a large group of selling occurs at the same time can lower the value.
Panic selling
Traders start to sell off their assets as a result of panic caused by FUD of any sort, like negative news or manipulations. This causes a rapid decline in prices as traders rush to sell their assets in order to save themselves from future losses. Panic selling and volatility are reciprocal in nature.
Loss of reputation
Even though crypto has a great future in the much more upcoming technologically advanced world, FUD can drastically decrease its reputation. It can evoke a sense of doubt in upcoming traders about its safety. The increasing legal regulations being imposed and news of market clashes leads to this downfall.
Around-the-clock operation
Crypto marketing is open 24/7 and being open anytime has its positives, it can also cause great market clashes as people won’t get enough time to think or research. Anything negative to the market can happen more quickly than predicted and increase challenges for crypto users.
Manipulation of prices
Traders can easily spread fake news with their societal status or anonymously to reduce the market prices and increase their assets by buying them when the prices are reduced.
Global reverberation
Anything negative can affect the crypto market globally as they are all connected. Being in different countries and time zones increases the complexity.
Implementation of regulations
Sensational FUDs can make the authorities file new laws or regulations which can further the panicking of investors. New regulations might seem hard on traders as they may not get the proper pieces of information about these new implementations.
What are the examples of FUD?
- Crypto crackdown in China: China banned crypto trading which was once the center of crypto mining in the world due to its possible risks of replacing fiat money. This caused FUD in public causing volatility in prices.
- Ban from Facebook: Facebook banned cryptocurrency-related advertisements in 2018 causing panic and FUD in traders reducing the growth of the industry.
- Mt. Gox hack: The 2014 Mt. Gox exchange breach caused a great loss of thousands of bitcoins. This made great mistrust in the security of bitcoins.
- Bitfinex Tether controversy: Bitfinex and Tether lacked the funds to get to the value of USTD in 2018 which caused market sell-offs.
- COVID-19 pandemic: The uncertainty caused by the pandemic led to market instability and volatility in 2020.
- Elon Musk’s tweet on Bitcoin: In 2022 Elon Musk’s tweet on planning to stop accepting bitcoins as payment for Tesla caused the prices to fall. He also caused the prices to go high when he initially started accepting bitcoins as payment.
Are there any positive outcomes for FUD?
FUDs are not always a bad thing as there are a few positive sides to it. The impact caused by FUD would last only for a period of time and would be stabilized sooner. It is like a cycle.
Sometimes FUDs can bring genuine issues to the limelight leading to improvements and proper clarifications. It also strengthens the system further.
The ban on crypto in China made miners move to the US which is a more regulated and greener industry. When the prices are low, traders can buy assets at cheaper prices and expand their wealth.
How to avoid FUD?
- Look for positive news: Negative news can spread faster than positive news and these can be easily manipulative. So, look for positive news and check for credibility before coming to a conclusion.
- Analyzing various news platforms: Go through different sources of news to come to a final conclusion as different versions of the news would be presented.
- Avoid panic: Panicking can cause the selling of great assets when the prices are low. Many FUDs may be intended to get the prices low by creating panic-selling.
- Wait for the cycle to end: FUD usually ends on its own after a while. This is like a cycle. The prices would go high once again after this.
- Following average down strategy: If the price lowers than the purchase amount, buy more at the time to increase the asset. The price would go high in time, that is when you can sell for a better profit.
- Stay informed: Keep up with new technologies and information regarding crypto at all times to detect fake news and improve profits. Always rely on reputable sources to educate yourself.
Read More: Crypto FOMO (Fear Of Missing Out): What You Need To Know
Conclusion
It is so common to gain notoriety for anything popular and growing. FUDs are unavoidable and have been there ever since the beginning of cryptocurrencies. FUDs are negative publicity that can psychologically affect users and cause the crypto market to go down significantly.
Fear, uncertainty, and doubt are common as crypto is a tangible asset and people can easily be panicked to lose their hard-earned profits. This panic would lead users to sell their assets in a frenzy with lower market prices as the price would decrease when mass selling occurs. FUD can also affect the reputation and growth of the industry negatively.
FUDs are caused by intentional and unintentional propagation of news through sources such as news and social media, as well as through online chat groups. These most probably won’t have credibility and getting moved by such uncredible information would only lead to the downfall of the asset and the market in general.
Being aware and avoiding such panic can reduce future losses on crypto transactions. Panicking is not a solution, so rely on various reputable sources and research on your own rather than blindly getting moved by FUDs.
