FUD has become a popular slang term within the crypto industry with enthusiasts citing it to describe a set of broadly debunked fears that arise on a recurring basis, often leading investors to sell at a loss. What does FUD mean and why do you need to know about it?

What is FUD and what does it stand for?

FUD stands for fear, uncertainty and doubt. Wikipedia describes it as “a propaganda tactic used in sales, marketing, public relations, politics, polling and cults. FUD is generally a strategy to influence perception by disseminating negative and dubious or false information and a manifestation of the appeal to fear”. 

Why does FUD happen?

Its role is to spread misinformation or rumours to make a competitor appear in a negative light. This in turn drives people towards the person spreading FUD. Usually, the entity spreading FUD is more established than the victim and so creates an imbalanced playing field, making it much easier to attack the FUD’s victim. 

What is FUD in crypto?

Since the very first cryptocurrencies were created back in 2009, and more so once crypto adoption started booming, traditional entities such as banks and governments felt threatened by this new, revolutionary type of finance. Given its main aim was to create a peer-to-peer technology that will bypass the traditional financial system, it was natural that they felt under attack. 

Envisioning a potential future whereby their authority and power may be exponentially lower, entities that felt threatened (such as banks and investment banking companies) started spreading FUD as a tactic to lessen the inherent value attributed to cryptocurrencies. 

A clear example of FUD at play in crypto is when back in 2017, JP Morgan’s CEO, Jamie Dimon, declared Bitcoin a fraud and ridiculed the notion of the bank investing in the cryptocurrency asset market. 

Nowadays, JP Morgan has upped its long-term price prediction for Bitcoin. It has even hired analysts and commentators to help their wealthy clients invest more and went so far as to launch a digital coin titled JPM designed to make instantaneous payments using blockchain technology.

How does FUD influence the value of cryptocurrencies?

When crypto investors experience fear, uncertainty and doubt they will inadvertently start doubting their confidence in the coins they hold and so are more likely to sell their cryptocurrencies based on emotions rather than evidence. This, in turn, may cause the value of crypto to fall in price before rebounding on the next round of bullish news. 

Falling victim to FUD can lead investors to sell at times when crypto is trending downwards, before buying in again later in the next bull run, resulting in a net loss.

For example, investors may lose faith when they see China has banned cryptocurrencies, not realising this was happening for the upteenth time. Or reading how Gary Gensler, the Chair of the Securities and Exchange Commission (SEC), is pushing to control cryptocurrencies and not understanding that increasing regulation actually increases institutional confidence in crypto. This would raise completely unfounded fears, uncertainties and doubts about investing in crypto. 

Since their inception, cryptocurrencies have been surrounded by criticism, doubt and speculation. Due to its decentralised, unmonitored nature, cryptocurrencies have been used by a wide variety of criminals including money launderers, drug traffickers, malware ransomists, and tax cheats. Because of this history, the crypto community has experienced a wide range of FUD concerns that attack the industry from time to time, threatening to deplete the industry’s value and growth. 

Traditional entities such as banks are keen to transmit FUD amongst potential crypto investors

Traditional banks 

Central banks have been especially vociferous against cryptocurrencies, with major central banks warning that cryptocurrencies are threatening the world economy. 

Central banks have cited threats to financial stability, fearing that they will lose the ability to control monetary supply and set interest rates, a key tool used by central banks to manage inflation and set the conditions for economic growth. 

Many crypto supporters, however, argue that it is the continual increasing of the monetary supply and the inevitable devaluing of currency by central banks that makes it hard for workers to save and puts people at the mercy of bankers.

A more positive and realistic approach seems to be regulation of crypto by governments and banks. 

El Salvador started using Bitcoin as legal tender in 2021,and while US lawmakers are trying to mitigate the risks this presents, it shows a clear shift in the trust that governments are showing towards cryptocurrencies.

Traditional banking is dead, some cryptocurrency experts claim. In response, banks seem to be seeing the value in this decentralised financial system and are choosing to embrace it. 

What does FUD mean for you, as a crypto investor?

Cryptocurrencies are volatile by nature. Their value can drop dramatically and recover just as quickly. 

This means that holders often sell off their holdings quickly and without forethought in an attempt to minimise losses. However by doing so, they experience a net loss, when if they had held through the FUD, they may well have been in profit. FUD is one of the key reasons that this may happen.

Feeling anxious and letting emotions run away with you is a natural reaction when your finances are involved. However, as every investor knows, it pays to keep your calm, stick to your plan and ride the wave out. 

Stay strong out there!

Frequently Asked Questions (FAQs)

As always, this article does not constitute financial advice and you should be sure to do your own research and consult a professional financial advisor before making any investment decision.

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