What Is FUD In Crypto? Why It Can Impact Prices

What Is FUD? An Introduction To Fear, Uncertainty, And Doubt

FUD is an acronym that stands for fear, uncertainty, and doubt. When the market is discussing the term FUD, it means some type of negative event has occurred that appears to be suspiciously timed with major Bitcoin price movements that have a large impact on the greater crypto market.

The source of FUD is always changing, but the impact is often the same: lower prices and a market wondering what happened and looking for something to point the finger at. Interestingly, some of the most successful investors in finance history believe that FUD itself can be predicted using technical analysis and the news cycle is part of the overall human behavior cycle that the study of price patterns is actually examining. 

For example, Bernard Baruch, once one of the richest men in America, famously was quoted as saying, “show me the charts and I’ll tell you the news.” But can FUD really be predicted, using technical analysis? And is the fact that FUD appears only around crashes that gives the impression that it is FUD causing the crypto market to react?

Who Uses FUD And Why? Why Does FUD Matter?

FUD is used by the crypto community as part of the overall information that gets priced into markets. Retail investors might get spooked out of positions easily after such negative news is spread, which prompts crypto derivatives traders to go short and the rest is a self-fulfilling prophecy of a correction playing out.

Conspiracy theorists believe that whales and the elite and wealthy are often behind spreading FUD in an effort to negatively impact the value of Bitcoin or crypto, and use this as part of a devious strategy. FUD matters because new investors are easily shaken out, and it causes prices to crash for long-term holders and the average cryptocurrency enthusiast with strong hands.

FUD In The Context Of The Cryptocurrency Market

FUD is especially powerful in the crypto market because the currency Bitcoin is still a speculative asset, and each altcoin is even more speculative at this stage. That means that these assets are highly volatile, making assigning a value even more challenging, and therefore price swings can be dramatic over information that often amounts to be nothing, or often false information entirely.

Cryptocurrency FUD Examples

The problem with the term “FUD” is that it is often used incorrectly, or applied so broadly it is hard to always understand what FUD is, and what should be considered FUD. There are also many sub-categories of FUD, each technically defining as fear, uncertainty, and doubt.

Here are the various types of FUD commonly found across the crypto industry, and the individual themes within each category.

Common FUD

This type of classic FUD are the most basic FUD examples because they are so often used, mostly incorrectly, to prove to others why Bitcoin and other cryptocurrencies are a bad thing.

• Bitcoin Is Used By Criminals – All money is used for crime, but Bitcoin often gets blamed with the worst acts because it is often directly tied to ransomware attacks and users often try to avoid taxes by using cryptocurrencies. However, US dollars in general are used far more for crime than cryptocurrencies. In fact, $100 bills are often used to snort cocaine, an illegal drug. This is impossible with Bitcoin.
• Too Volatile To Be Used As Currency – This form of Bitcoin FUD isn’t entirely wrong, as Bitcoin is currently too volatile to be used as a currency reliably for businesses. However, users can use it as such, but they choose not to. Spending coins often leads to regret. Early users spent 10,000 BTC on two pizzas, which would be worth over half a billion dollars.
• No Intrinsic Value – Because Bitcoin isn’t a tangible asset that individuals can see and hold physically, they often can’t associate it with value and scarcity like gold. They also know it isn’t backed by another asset like gold, oil, or even the military might of the government like fiat currency. However, these FUDsters are forgetting the value of the underlying blockchain network and the network effect.

Technology FUD

This type of FUD is most closely associated with the technology itself. All technologies have pain points. The internet, for example, has led to widespread privacy issues. But it is one of the most enabling technologies in history, allowing mankind to move into the digital age.

• Bitcoin Is Bad For The Environment – In theory, Bitcoin is bad for the environment, because it requires a lot of energy to power. It takes more energy than many small countries to keep the Bitcoin network churning along. However, Bitcoin miners are recently relying on greener and renewable energy sources, and are working toward a completely renewable industry. 
• Coins Are Easily Lost – This is another type of FUD that is technically true, but with a little foresight and preparation, can be eliminated completely. The Bitcoin core code makes it so that there will only ever be 21 million BTC in existence. Millions are said to be lost, however, due to sending BTC to an incorrect address, users losing access to their wallets and private keys, users dying without passing along assets to next of kin, and much more. But it is now much easier to store crypto assets safely. Just remember to make a plan to pass your assets on to your loved ones in case of any tragic situation.
• Bitcoin Is Too Slow – Bitcoin is indeed slow compared to most other cryptocurrencies. But what it traded off in speed, it got back in security. As a cryptocurrency designed to be the global settlement layer for all finance, security was a must over speed. Second-layer technology like Lightning is making this argument obsolete.

Regulatory FUD

Regulatory FUD is the worst kind of FUD, because governments mean business and for the most part, users must comply within the restrictions of the borders they live in. These borderless technologies and currencies are still bound to the rules of which the users themselves live. Governments use this to their advantage, and against cryptocurrencies, often because Bitcoin and other cryptocurrencies pose a threat to the fiat currencies that they rely on to control individual citizens and businesses that operate there.

• Government Bans – At any given moment, a government could ban Bitcoin and cause users in its country to panic sell as fast as they can to get out before it is too late. The recent China FUD saw the country first ban Bitcoin mining, which ended up being positive for the cryptocurrency. Not satisfied, China also banned cryptocurrencies in general, but are now looking to unban them. 
• Tax Law Changes – Taxes are already extremely complicated for cryptocurrency investors and traders, which treat the currencies as if they were property. This is another reason why they cannot yet be realistically used as currencies to pay for goods or services, as each time a person does so, it would cause a taxable event and a need to pay capital gains tax if any gains were made.

Miscellaneous FUD

This type of FUD doesn’t quite fit in the other categories and has so much variety to it, it needed a more blanket statement like “miscellaneous” to properly convey what the category is about.

• Celebrity Influence And Control – Certain types of influencers, or crypto market celebrities – even celebrities in the real world we see on TV and in the news, can use FUD to manipulate and pump and dump markets. Celebrities from Elon Musk to Kim Kardashian West have all been involved in some type of controversy or scheme involving cryptocurrencies.
• Quantum Computing – Cryptocurrencies are protected cryptographically by complex mathematical keys. The problem here is that certain types of computers are on the way that can easily crack these mathematical codes and can access the assets that are protected behind the cryptography.
• Solar Storms  – Now the FUD is really getting weird, but it is a possibility so people fear it. Even Deutsche Bank warns that a massive solar storm could send electromagnetic waves hurling toward the earth that knock out power grids, and with it, the internet and all blockchains. What good are digital assets if you can’t access the internet, or even electricity? How would the network continue to run?

Recent Narrative And FUD Impact

The recent FUD narrative involving Elon Musk and then China, is what made the discussion around the term FUD a hot button debate once again.

The narrative first was positive surrounding Musk, who revealed his company Tesla had purchased BTC, and had begun accepting BTC payments toward their green automobiles. Bitcoin price pumped to all-time highs.

But then Musk suddenly changed his tune. His company was up for some government funding for their green initiatives, and couldn’t be caught in bed with Bitcoin which at the time became under scrutiny for its impact on the environment.

Because the Bitcoin network was growing rapidly, it was suddenly requiring more and more energy. At the same time, China came under fire from the global community for alleged slave labor in coal mines that were claimed to be used for electricity that fueled Bitcoin mining. 

To stop the negative press, China immediately banned Bitcoin mining in the region, and then later banned cryptocurrencies. The result of the sudden exodus of BTC miners and sellers caused a more than 50% selloff in Bitcoin and other cryptocurrencies, showing how powerful FUD can really be.

But was this FUD the reason for the correction or was the timing of the FUD simply the hive mind turning and the trend taking a quick break? The chart below shows the timing of certain news and how prices reacted.

Why FUD Isn’t Always A Bad Thing

FUD isn’t always a bad thing. For example, because so many BTC miners left China seeking a more welcoming environment, BTC mining is now a much greener industry, taking place mostly in the United States under stricter conditions. 

FUD also creates an opportunity for trading volatility for traders and buying assets a lot cheaper for investors. Bitcoin price is already back at the highs set before the FUD began, proving that it wasn’t a bad thing at all, but another chance to go long and make money on the price swings in between.

When FUD strikes, be sure to consider opening a short using AMSTERDAX, an award-winning trading platform. When FUD is over, going long leads prices back to new highs and traders to serious profits.

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Because there is so much subjectivity to crypto FUD, we’ve prepared these commonly asked questions to make it easier to understand what’s going on with crypto FUD.