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What Does FUD Mean?

By Brian Nibley · November 29, 2021 · 5 minute read

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What Does FUD Mean?

Fear, uncertainty, and doubt (FUD) refers to a general mindset of pessimism about a particular asset or market. Most of the time, the term is applied to information or events that are having their negative effects exaggerated or made up (as in, “don’t listen to that, it’s just more FUD”).

FUD is one of many stock terms to know but can apply to any asset class. The phrase carries special significance in the crypto realm. Bitcoin and cryptocurrencies have witnessed an extraordinary amount of FUD over the years, and often still do today.

What Does FUD Mean in Investing?

Investment strategies based on FUD are not usually recommended. Sometimes FUD might be justified, but in general, the term is used to describe unwarranted negative sentiment in the market.

FUD can be thought of as the opposite of FOMO (fear of missing out). While FOMO tends to affect people on a more personal level, in that they don’t want to miss out on potential gains, FUD can be described as more of a collective effect that spreads like wildfire, typically through social media.

When markets are going up, many people fall victim to FOMO trading, and when markets are going down, FUD can spread more easily. In the most basic sense, you could think of it like this: FUD equals fear and FOMO equals greed.

The two can sometimes be contrarian indicators. In other words, when FUD seems to be everywhere, astute investors might actually be buying assets at reduced prices, and when many people are experiencing FOMO, seasoned traders might actually be selling at a premium.

Crypto traders offer a counter to FUD by using the term “hodl.” The hodl meaning is interpreted as “hold on for dear life.” Hodl comes from an old Reddit post where someone posted a long rant about having trouble timing the market while misspelling the word “hold” several times. The phrase was initially used in reference to Bitcoin but can apply to different types of cryptocurrency.

What Does FUD Mean in Crypto?

In crypto, FUD means one of two things:

1.    To spread doubt about a particular token or project in an attempt to manipulate prices downward

2.    The general skepticism and cynicism about crypto as an asset class, and any related news/events

In September of 2021, the Solana (SOL) network (a smart contract platform that rivals Ethereum) suffered an outage for about 12 hours. This is an example of the kind of event that can generate significant FUD, regardless of the initial cause or eventual resolution. Even the rumor of such a negative event possibly happening can generate FUD.

FUD can be generated over just about anything:

•   A crypto influencer tweets that Tesla won’t accept BTC as payment: FUD

•   China bans Bitcoin for the 5th time this year: FUD

•   An investment manager says they will never own crypto: FUD

FUD Crypto and Memes

Crypto FUD also tends to involve the spreading of memes that can either amplify or lessen the FUD’s effect. Sometimes FUD being spread by the media is widely seen as trivial, in which case memes making fun of the idea might pop up. Or, if the FUD is perceived as more legitimate, memes making fun of those not taking the threat seriously might start circulating.

When Can FUD Occur?

FUD can occur whenever prices are falling or a big event happens that’s widely thought to be bearish. A company could miss earnings expectations or it could be revealed that an influential investor has taken a short position against a stock. Or the FUD could come from a larger source, like a pandemic, natural disaster, or the threat of a government defaulting on its debt.

The more catastrophic something could theoretically be, and the greater uncertainty surrounding its outcome, the more it becomes a suitable subject for people to spread FUD.

Sometimes markets react swiftly across the board to such news. Other times people take things out of context or exaggerate them, creating a sort of fake news buzz to scare others into selling.

In stocks and other regulated securities, it’s against the law to spread FUD with the intention of lowering prices. Doing so is considered to be a form of market manipulation and could subject individuals to legal action from regulatory agencies like the SEC, FINRA, or FINCEN.

As not all cryptocurrencies have been definitively been classified as securities by all regulatory agencies, there is still some gray area. The idea that many altcoins could one day be deemed securities has itself become a big topic of FUD, because it would have a big impact on the regulatory landscape surrounding crypto.

FUD Crypto Examples

Here are a few well-known examples of FUD in crypto. These examples show FUD at its finest. There are elements of truth to them, but the idea is that their detrimental impacts to asset prices are exaggerated to the point of hysteria.

China Banning Bitcoin

This might be one of the best examples of FUD in crypto, and perhaps the one that has been the subject of more memes and Twitter rants than any other.

Practically every year since crypto hit the scene in a big way, and sometimes multiple times per year, officials in China claim to ban Bitcoin in one way or another. Of course, a real, comprehensive “ban” on Bitcoin would be a one-time event. What really happens is the Chinese government introduces some kind of restrictions for individuals or organizations involved in crypto markets, and media outlets report the event as a “ban on Bitcoin.”

In 2021, China really did make Bitcoin mining illegal in the country. Even so, markets shrugged off the event in time.

Government Regulation

Regulatory concerns coming from any national government can be a big source of fear, uncertainty, and doubt. Because crypto markets are still somewhat new, many countries have yet to adopt regulatory frameworks that create specific rules around the use and taxation of cryptocurrencies.

Several countries have tried to make any use of crypto illegal, while others make public statements about harsh restrictions coming down the line. Whether the threat is real or perceived, the mere suggestion of governments cracking down on crypto transactions tends to spook investors.

Bitcoin Boils the Oceans

Another example of FUD is the argument that Bitcoin uses so much energy that it’s not sustainable, making it a dangerous threat to the planet.

The truth is that the majority of bitcoin mining is done with renewable energy. Gold mining, banking, transportation, construction, healthcare, and other industries use exponentially more energy than it takes to maintain the Bitcoin network. The banking sector alone uses more than twice the energy of Bitcoin.

Recommended: How Much Electricity Is Needed to Mine Bitcoin?

The Takeaway

Crypto FUD is one of many crypto terms that are almost as old as Bitcoin itself. Today, those who spread FUD are likely hoping to buy coins at lower prices after inducing holders to sell.

FUD can come from anywhere and be focused on just about anything. Some content creators have even turned FUD into a marketing tactic: They make YouTube videos, blog posts, or investment newsletters designed to evoke fear in their audience. Then the creators offer something that promises to ease that fear. The solution comes in the form of a product or service that can be bought from the creator.

Not giving in to FUD? With SoFi Invest® you can trade cryptocurrency like Solana, Enjin Coin, Bitcoin, Cardano, Litecoin, and more.

Find out how to get started with SoFi Invest.

Photo credit: iStock/dolgachov

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