What exactly is FUD in the crypto world? Why can it drive coin prices down?

As long as you are in the crypto world, you cannot avoid a word: FUD. This guy can directly affect your Wallet and even destroy a project. Today, let's uncover how it works.

FUD = fear, uncertainty and doubt (FUD)

In simple terms: someone spreads negative news about a certain coin or project (the truth of which may be uncertain), which can lead to widespread fear among investors, ultimately resulting in a collective sell-off. This process is called FUD.

For example: Trader A bought token B, and then suddenly there was news that “B coin is going to be delisted from the exchange” (false announcement). A saw that various Telegram communities were discussing it, and he panicked - the risk of losing money was too great, so he quickly sold at a low price. When a large number of people think this way, the selling pressure comes in, and the price of B coin plummets from a high. This is the power of FUD.

Who is creating fear, uncertainty and doubt (FUD)? There are interests behind it.

Organized and premeditated:

• Some large holders and KOLs deliberately release false information to drive the coin price down.
• Then take the opportunity to buy at a low price, and wait to profit when FOMO (fear of missing out) triggers the price increase.
• Social media has become the strongest front for the spread of fear, uncertainty and doubt (FUD).

Sometimes it's pure hatred: Some people spread rumors about the project simply due to personal grievances.

How strong is the destructive power of FUD?

Regarding the project: Small projects, if they do not respond quickly, will directly fail and can never recover.

To Investors: After being scammed once, I can no longer trust this market, and many people have since left.

For the entire ecosystem: FUD is one of the biggest obstacles to mainstream adoption in the crypto world.

How to avoid being cut by FUD? 6 defensive moves

1. Supplement Knowledge Reserve — Learn fundamental and technical analysis, and be able to assess projects on your own.

2. Have a Trading Plan — Set your stop-loss and take-profit points before entering the market, and avoid blind trading.

3. Calculate the risk-reward ratio — Every trade should quantify the relationship between risk and return.

4. Flexible but principled — Observe market psychology while adhering to strategy and adjust dynamically.

5. DYOR (Do Your Own Research) — Trust only official sources and learn to distinguish false information.

6. Do not chase the news — Following the trend and operating as soon as news breaks will lead to losses.

Review of Famous FUD Cases in the Crypto World

Bitcoin vs China: A Decade-Long Battle of Fear, Uncertainty and Doubt (FUD)

Since 2013, the Chinese government has taken a series of major actions regarding BTC:

• Ban bank transactions of BTC → Ban exchanges → Ban ICOs → Limit mining → Block accounts…

Every time a policy comes out, global coin prices plunge. But what is the result? Exchanges like Binance, Huobi, Gate, and OKX have moved locations, which has actually dispersed the risk.

Binance vs SEC: The Storm of June 2023

The SEC accuses Binance of violating securities laws, stating that BNB and BUSD are securities. As soon as the news broke:

• BTC dropped to $25,800 (down 5%)
• ETH fell to $1,811 (down 4.5%)
• Binance had a net withdrawal of 838 million dollars in 4 days.

But this withdrawal amount only accounts for 5% of the exchange's total assets, and in the end, Binance won the lawsuit and continued operations.

Tether USDT decoupling incident: a false alarm

In June 2023, USDT once fell to 0.9972 USD, causing panic:

• “USDT is going to collapse! It will become the second UST!”
• Investors are throwing away USDT to exchange for USDC
• Whales take the opportunity to arbitrage

What is the truth? CoinDesk reported old data from 2021, and after Tether clarified, USDT recovered to $0.99826 in just 7 hours.

Core Insights

Fear, uncertainty and doubt (FUD) is always unavoidable, but you can resist it through learning + rationality + your own research. The people who make the most money in the crypto world are often not the ones who are well-informed, but those who can control their emotions and have a plan.

Instead of being scared away by fear, uncertainty and doubt (FUD), it's better to learn how to distinguish between true and false in FUD – that is the real skill to survive in the crypto world.