Recently, I've seen many discussions about market sentiment issues, especially regarding the two common psychological traps in finance: FUD and FOMO. In fact, these two concepts have completely opposite effects on investors, but both can ruin your investment decisions.

First, let's talk about what FUD is. FUD is an abbreviation for Fear, Uncertainty, Doubt, and simply put, it’s a mixture of fear, uncertainty, and suspicion. In the crypto space, you often see this situation. For example, Tether (USDT) has long been questioned by the community—because it frequently issues large amounts of USDT, some suspect whether it truly has enough reserves to back it. There are also rumors that Tether holds high-risk assets, which makes people worry whether it can quickly liquidate to pay investors.

I’ve noticed that many people don’t distinguish clearly between FUD and FOMO. Both can influence your trading behavior, but their logic is completely opposite. FUD usually comes from market manipulators, KOLs, or celebrities, who spread alarming information to scare retail investors into panic selling. FOMO, on the other hand, is when retail investors see others making money and fear missing out, so they rush in to buy at high prices. One is a sell driven by fear, the other is a buy induced by greed. In both cases, retail investors are the losers.

The case of Bitcoin spot ETF in December 2023 is a typical example. At that time, Cointelegraph announced that the SEC approved a Bitcoin spot ETF, and Bitcoin’s price suddenly surged above $30,000. As a result, many traders closed their positions, losing over $100 million. Later, it turned out to be false information. Was this an accidental dissemination mistake or someone deliberately testing the market’s reaction? It’s hard to say. But regardless, this is a real harm caused by FUD in the finance market.

So how to respond? My experience is that several aspects need to be well prepared. First, have long-term confidence in your investments. For example, if you believe Bitcoin will become an alternative asset, short-term negative news shouldn’t bother you too much. Second, develop the habit of verifying information. Not all bad news is FUD; learn to cross-check from multiple reliable sources. Third, have a clear investment strategy and stick to it. For instance, if you are a long-term investor, you can use dollar-cost averaging to buy during FUD, which can even lower your average cost.

Another important point is to have a take-profit plan. If your investment is already profitable, consider taking profits in stages. This way, even if a FUD-induced decline occurs later, you won’t be too passive. Also, limit your time consuming on negative news. Sensational media and social platforms often amplify anxiety.

Honestly, FUD is most easily used to manipulate the market. Some people deliberately spread false information to create panic, then buy at low prices. This happens in stock markets, real estate, commodities, and more. So the key is to stay clear-headed, keep learning, and develop critical thinking to evaluate information. Remember the lessons learned from being fooled by FUD in the past, so you can make more rational decisions next time. That’s more important than anything else.