When it comes to navigating the cryptocurrency markets, staying informed and staying away from FUD can oftentimes be more complicated than one might imagine. In this article, we're going to guide you through how to recognize FUD in the blockchain space and how to avoid it.
Since Bitcoin entered the scene in 2009, the crypto markets have seen their fair share of ups and downs. Although it's true that each market downturn has been followed by a recovery and considerable development, experienced and novice traders alike may find that times of decline are difficult to navigate. Particularly with the rise in FUD.
Before we cover the tools of the trade to recognize and avoid FUD, let's first cover what FUD is exactly.
What is FUD?
FUD in the cryptocurrency realm stands for Fear, Uncertainty and Doubt. This term is used to refer to inaccurate information released by people who wish to manipulate the markets. Releasing FUD content is intended to influence a trader to make decisions that might affect the cryptocurrency's price or their investment in some way (usually encouraging them to sell).
While commonly used against Bitcoin, Ethereum and other cryptocurrencies are also targeted. FUD typically leads to investors selling off their coins, leading to a panic sell which snowballs and results in a significant loss in value for the coin.
Often mentioned alongside FUD is the term FOMO, Fear Of Missing Out. FOMO is centered around the fear of people missing out on profits, leading them to make quick decisions that aren't necessarily the best ones. While FUD tends to instigate selling an asset, FOMO tends to drive traders to buy an asset. Essentially, these two terms are designed to tap into human emotions that lead to quick decisions.
FUD is typically released through a rumor published on a well-respected website, a negative news item, or a well-known figure expressing concerns about a certain asset (commonly done over Twitter ). Content surrounding FUD and FOMO tend to be from organizations or individuals that have something to gain from the intended action. The content is designed to strongly influence the reader.
FUD and FOMO aren't strictly related to the crypto market, such tactics have also been witnessed in the stock market and other commodity trading spaces. The jargon has become synonymous with trading.
How to recognise FUD
The crypto community might seem tight-knit but there are often ill-actors that gain access to the trusted space and infiltrate it with bad news. This is often seen when people use a commonly discussed topic, such as regulation, to build a narrative that isn't necessarily true to influence traders.
Here are several tips to ensure that you don’t fall victim to FUD:
Establish a trading goal
Before you enter the crypto market ensure that you have definitive goals, with accompanying timelines. When faced with FUD or FOMO information, consider if the resulting actions of this news will move you closer to your goal or further away. If you stay focused on your goal you are less likely to be swayed by market sentiment.
Build a trading strategy before entering a trade
A trading strategy generally involves determining a stop loss, entry point, target sell point, and amount of capital. By establishing this before entering the trade, you will have clear objectives to follow and be less likely to fall victim to FUD-centered misinformation.
Stay informed, but verify sources
Keeping an eye on the crypto markets and staying informed is imperative for any trader, especially day traders. Ensure that the places that you acquire your information from are reputable and legitimate, and if something sounds suspicious, verify it through a number of other sources.
Be patient and consistent
Crypto trading is not a get-rich-quick scheme, instead, it is about making well-educated trades based on market movements and investing in technology you believe in. Don’t get caught up in trying to make quick money, instead, be patient and consistent in your attempt to reach your original goal, and never steer too far off the path.
Despite this sounding difficult, FUD is easily avoidable if you stick to these tips above and only seek information from reliable news sources. While Twitter may have quick tips, it's also hard to determine what the author's intentions are.
Consider whether something sounds true or not, and always do your own research when looking to invest in a new project. From a financial standpoint, investing in digital currency can be a lucrative endeavor, so be sure to act responsibly and observe market trends with a pinch of salt.
Disclaimer: This article is intended for communication purposes only, you should not consider any such information, opinions or other material as financial advice. This communication should be read in conjunction with Tap’s Terms and Conditions.