You will often hear cryptocurrencies market terms such as FOMO, FUD, HODL, etc., even if you are new to the market. Recent months have been a period of FUD discussions in the crypto community, with governments, celebrities, and economists claiming cryptocurrency will cause world problems.
In this article, we will explain all about the FUD term in crypto: what it is, what types there are, why it exists, how it is used, and how it impacts market prices.
What is the FUD Process? A Guide to Understanding FUD
As a result, FUD is defined as fear, uncertainty, and doubt. If the term FUD is used in connection with crypto, it refers to some form of negative event that could be closely linked with major changes in the Bitcoin price. This can have a significant impact on all crypto.
There are many sources of FUD, but the effect is often the same: lower prices and confusion among the market as to what happened and why. Quite a few successful investors in the history of finance have suggested that FUD can also be predicted with technical analysis and that price patterns are a reflection of human behavior.
FUD is used in what way and why? What role does FUD play?
A large part of the information used by crypto communities to set their prices includes FUD. As a result of such negative news, investors will most likely sell their crypto derivatives after being scared out, and the rest will play out like a self-fulfilling prophecy.
The conspiracy theory claims wealthy individuals and whales cause FUD in order to negatively affect Bitcoin’s value and cryptocurrencies’ value, and that this is part of a devious scheme. Typical cryptocurrency enthusiasts and long-term holders do not suffer from FUD, since new investors are easily discouraged and shaken out.
A FUD environment prevails in the crypto market
In particular, the crypto market is vulnerable to FUD due to the fact that Bitcoin, and all altcoins, are still speculative assets. Therefore, the assets tend to be highly volatile, making it more difficult to assign a value. Due to this, sometimes price swings are a result of inaccurate or irrelevant information.
The impact of recent narratives on FUD
FUD is once again at the forefront of discussions after Elon Musk’s recent FUD narrative and the actions of China.
Musk began the narrative by announcing Tesla had acquired bitcoins, and accepted bitcoin payments toward the development of their green cars. Since then, the bitcoin price has increased exponentially.
Then Musk abruptly changed course. During this period, Bitcoin was being scrutinized for its environmental impact, so the company qualified for some government funding for eco-friendly initiatives.
Energy was becoming scarcer and scarcer as the Bitcoin network grew rapidly. Slave labor was alleged to be used in Chinese coal mines, which were alleged to be used to power Bitcoin mining.