FUD stands for “Fear, Uncertainty, and Doubt.”
FUD stands for “fear, uncertainty, and doubt” and refers to a general mindset of pessimism about a particular asset or market, manipulating investor or consumer emotions so that they succumb to FUD.
While the term “fear, uncertainty, and doubt” has been circulating for a century, it became famous as the abbreviation FUD in the 1970s — and is widely known more recently, thanks to the highly volatile crypto markets. FUD is also used throughout finance and can apply to any asset class.
Here’s what you need to know about FUD now.
What Does FUD Mean in Investing?
Investment strategies based on fear, uncertainty, and doubt are not usually recommended. Sometimes FUD might be justified, but generally, the term describes irrational, overwhelming negative sentiment in the market.
Many investors have concrete or pragmatic fears and doubts. Some investors worry that they’ve invested too little or too late (or both). Others might fear a total market meltdown. Some investors worry that an unforeseen factor could impact their investments. These are ordinary, everyday concerns.
FUD is different, and it’s essential to understand what FUD is. When investors talk about FUD, they’re referring to rumors and hype that spread through media (and social media) that drive impulsive and often irrational investor decisions. Think about the meme stock craze.
Thus, FUD can often have a demeaning edge because it refers to these unpredictable waves of investor behavior.
FUD vs. FOMO: What Is the Difference?
What is FUD in stocks or the stock market? FUD can be thought of as the opposite of FOMO (fear of missing out). While FOMO inspires people to do what others are doing — often in that they don’t want to miss out on a hot stock and potential gains — FUD can be described as a collective negative effect that spreads like wildfire, typically through social media.
When markets are going up, many people fall victim to FOMO trading, but when markets are going down, FUD can also spread swiftly. In the most basic sense, you could think of this: FUD equals fear, and FOMO equals greed.
The two can sometimes be contrary indicators. In other words, when FUD seems everywhere, astute investors might buy assets at reduced prices (aka buying the dip). When many people are experiencing FOMO, seasoned traders might 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 an investor ranted about having trouble timing the market while misspelling “hold” several times.
The phrase was initially used about Bitcoin but can apply to different types of cryptocurrency.
What Does FUD Mean in Crypto?
While FUD is often associated with investor sentiment in the crypto markets, the phrase “fear, uncertainty, and doubt” has a much longer history than many people realize.
The History of FUD
According to Wikipedia, the general term “fear, uncertainty, and doubt” dates back to the 1920s. Still, its abbreviation as FUD may have begun in 1975 when an executive departed IBM to start his own company and noted that FUD was being used to discourage customers from leaving IBM.
FUD soon gained traction in marketing, sales, and public relations and was used to indicate psychological manipulation through disinformation.
As FUD traveled over to the investing realm, it has taken on a broader connotation — particularly in the crypto markets — referring to the many potential investors who succumb to sudden anxiety or pessimism that changes their behavior.
FUD and Crypto
In crypto, FUD has become a well-known crypto term, and it means one of two things:
1. To spread doubt about a particular token or project to manipulate prices downward.
2. The general skepticism and cynicism about crypto as an asset class and related news/events. Even the rumor of an adverse event possibly happening can generate FUD.
• A crypto influencer tweets that a large company won’t accept BTC as payment: FUD
• China allegedly bans Bitcoin for the umpteenth time: FUD
• An investment manager says they will never own crypto: FUD
FUD Crypto and Memes
Crypto FUD also tends to involve spreading 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 more significant 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 more significant 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 to lower prices. Doing so is considered 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 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 become a big topic of FUD because it would significantly impact 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 on asset prices are exaggerated to 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, an absolute, comprehensive “ban” on Bitcoin would be a one-time event. The Chinese government introduced restrictions for individuals or organizations involved in crypto markets, and media outlets reported the event as a “ban on Bitcoin.”
In 2021, China did make Bitcoin mining illegal in the country. Even so, markets shrugged off the event over time.
Government Regulation
Regulatory concerns from any national government can be a significant source of fear, uncertainty, and doubt. Because crypto markets are still somewhat new, many countries have yet to adopt regulatory frameworks around crypto that provide 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 some forms of crypto use so much energy that it’s not sustainable, making it a dangerous threat to the planet. These concerns usually refer to proof-of-work (PoW) crypto like Bitcoin, Dogecoin, Litecoin, Bitcoin Cash, Ethereum Classic, and others that require vast amounts of computer power for mining coins.
However, some analysts claim that some crypto mining is done with renewable energy. Moreover, these analysts note that gold mining, banking, transportation, construction, healthcare, and other industries use exponentially more energy than it takes to maintain the Bitcoin network.
? Recommended: How Much Electricity Is Needed to Mine Bitcoin?
The Fear of Lost Crypto
Nothing stokes investors’ fears like the idea of investment losses, but with crypto, there’s the even greater dread of losing your coins. Unfortunately, there is some truth to that anxiety. There are notable cases of crypto being lost and never recovered, usually because someone loses the private keys that gave them access to their crypto.
Unfortunately, because crypto is decentralized, investors’ assets aren’t protected the same way they would be in traditional, centralized banking systems. (While it’s theoretically possible that all your cash could vanish from your bank overnight, it’s highly improbable. And even if it did, you’d benefit from FDIC insurance.)
Influential Crypto Tweets
Another example of FUD includes some well-known Tweets and social media posts by famous people that had an immediate impact on a given type of crypto.
It’s important to remember that FUD moments don’t last, and the impact of a single influential person on the price of a particular coin — even if it roiled markets for some time — was temporary.
Corporate Crypto Assets
In the last couple of years, several big corporations have launched or announced plans to launch a proprietary form of crypto. These include Facebook/Meta, JP Morgan Chase, Google, Amazon, Mitsubishi, and others.
Unfortunately, it’s not that easy to get new crypto off the ground — despite the many comparisons between the crypto markets and the frontiers of the Wild West — and the failure of at least one high-profile coin helped to sow FUD for some investors.
Crypto Tax Law Changes
Whenever the question of crypto’s regulatory identity comes up (Is it a security or a commodity?) FUD ensues. That’s large because of tax issues. Right now, the regulations are up in the air, but the fear is that if crypto is deemed a security, the SEC will have oversight, which could impact crypto companies and investors significantly.
Solar Storms
Because crypto is digital, a great deal of FUD stems from technology-based fears that random events could take down electrical grids and effectively wipe out crypto holdings. One such FUD-inducing rumor is about the possibility of Earth being zapped by solar storms, but the scientific validity has yet to be confirmed.
The Takeaway
Crypto FUD is one of many crypto terms that have become popular, but the underlying concept — that fear, uncertainty, and doubt can influence investor behavior — is not new. FUD as an actual strategy exists in many spheres, including marketing, sales, public relations, and politics (and crypto).
FUD can come from anywhere and be focused on anything, but crypto can be particularly vulnerable to FUD because this market is already quite volatile. It’s also a very new sector, and some investors don’t fully understand the technology involved, and they can be manipulated by alarmist rumors or celebrity opinions.
Fortunately, many investors take a more rational approach to the markets, particularly crypto. If you want to start your crypto portfolio, Coinbase – Crypto Currency – Sign up with this link and get $10s free?! Buy/sell/exchange crypto, and use their ATM card to access your cash easily!
FAQ
Who uses FUD?
Some FUD arises naturally from market movements or economic conditions. Some FUD is deliberately cooked up to instill enough fear in the markets that investors make impulsive decisions, e.g., selling one type of crypto for another.
Why does FUD matter?
Investors need to understand the concept of FUD so they don’t get caught in the inevitable waves of negativity that can lead some people to panic and make poor choices.
What Counts as FUD?
Ordinary fears and concerns about market performance, or an investor’s personal long-term goals, don’t count as FUD. FUD refers to a broader market or crypto phenomenon where highly negative information goes viral and causes investors to panic.
