FOMO and FUD are the two most popular slangs in the cryptocurrency world. Let's find out what they are all about.
Fear.
“An unpleasant emotion or thought that you have when you are frightened or worried by something dangerous, painful, or bad that is happening or might happen.”
Fear is a naturally emotional response when we’re about to lose something that is important to us.
Fear may cause people to avoid decisions that could benefit them in the long run or hang back during social interactions for no good reason.
How about the fear in the cryptocurrency world?
FOMO, or Fear Of Missing Out, typically happens when you panic over other people’s successes, leading to the irrational hope of getting rich quickly just like them if you use the same ingredients.
FUD stands for Fear, Uncertainty and Doubt. It happens when a bad news spreads through a community and people started to believe in it, even if it might come from an unreliable source.
In the crypto space, FOMO happens when the price soars. Do you still remember the history of Bitcoin? The Bitcoin market started in 2017 at about $900. As of mid-November, the Bitcoin price was fluctuating between $6,000 and $7,000, and the public thought it could not grow any bigger. Inversely, FOMO kicked in, six weeks later the price was at $20,000.
The fact why it was labelled “FOMO” because that was the only thing driving the market. Most people did not actually understand the blockchain technology and only a few truly believed in its use case. However, people assumed that they would get rich overnight if they bought Bitcoin.
Bitcoin was all over the news and started to invade in every discussion. Homer Jay Simpson - the protagonist of the American animated sitcom 'The Simpsons', was talking about it. Fools were rushing in. If you thought this would only keep the wave getting higher, the market answered it differently. Bitcoin slumped in 2018 to only $3,000. It was a slow death over the year, not a roller-coaster drop, but it was enough to end the public interest and hope.
However, Bitcoin has started its new boom and is currently at $10,200 at the time of this writing. Essentially, it is the massive investment cash from financial organisations and rapidly rising exchange volumes from traders that are pushing the price up.
The reason that triggers FOMO can possibly be different between individuals, but mostly is a price of over $20,000 per coin.
Speaking of fear, FUD is the fear that is not based on fundamentals or charts, but based on bad news spreading around social media.
In addition to making people scared, cautious, or excited about certain currencies, FUD can also cause the price of the coin to drop in specific circumstances. FUDsters can also emerge in the form of actual influencers who have their genuine supporters. A FUDster can be a celebrity, a prominent professional figure like Warren Buffet, or...Trump. They speak for or against a cryptocurrency, spreading that sentiment across their followers.
People who admire and learn to invest like Warren Buffet may take his advice and see cryptocurrency as “rat poison”. Or people who believe that Donald Trump can “make America great again”, may think cryptocurrencies are “based on thin air”. After Trump posted his criticism of cryptocurrencies on Twitter, Bitcoin then fell sharply below $10,000 as many people sold out their coins.
How to cope with FOMO and FUD?
Both FOMO and FUD are widespread, emotional and fear-based factors that affect investors in the crypto market. People who trust their instinct more than their knowledge, or people who invest in cryptocurrency with no analysis, or proof, but rumors, won’t get very far in this space.
It’s common sense to buy a certain cryptocurrency when its price goes down and sell it at a higher price. However, is it always supposed to be that simple?
As such, it’s extremely important that anyone needs to have cryptocurrency knowledge to understand how FOMO and FUD work, to move forward and keep an eye out for influencers who you believe are manipulating your decisions.
More specifically, you should have enough patience and faith for what you are investing in. Most of what circulates around the world of cryptocurrency contains fearsome headlines or discouraging quotes. It’s vital to hear from both sides, do your own research, and stick to the fundamentals and charts. That is the only way to cope with FOMO or FUD.
In this article, we want to keep things very general and put aside any specific investment advice, so of course this may not be practical to every situation (for example, it depends on your trading strategy). However, there is one bit of good advice we can give you: Don’t make trades based on your fear; say no to FOMO, but consider the effects of FUD.
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