FUD and FOMO Explained - How to Protect Yourself from Both

In the world of cryptocurrency, there are many terms that investors must make themselves acquainted with during their time trading. Due to the nature of cryptocurrencies, and the way information is transmitted in these communities, sometimes it can be hard to tell what it actually the truth, unfortunately. The internet is a wonderful place where people are free to share information, but many times that information is just plain wrong or at the very least misleading.

People often become very passionate about the projects they support, and they can even be very attached to them emotionally. In many cases, emotion and investing do not go hand in hand, because it can cause you to make foolish mistakes. Blind hatred and blind love are both equally disastrous, and you should be wary of both when it comes to your money.

In this article, we’re going to go over two of the most popular terms in the world of cryptocurrency: FUD and Fomo. Both are dangerous for their own reasons, and you must learn to avoid them if you are to be successful in your endeavors.

What is FUD?

FUD is an acronym for fear, uncertainty, and doubt. It was originally popularized by the open source software movement, due to the fact that commercial software developers would try to scare consumers into purchasing their solution instead of using freely available alternatives.

In the cryptocurrency scene, the meaning is much the same. Keep in mind, however, that every criticism of a coin or token is not FUD. Usually, when people are referencing this tactic it means that the person spreading it is doing so without a valid reason. Usually, they will spread information that is not totally true or could be misleading.

You may be familiar with this in the form of “click bait”, which has become popular on the internet in recent years. Website owners will intentionally misrepresent the content of their post by using the title in an effort to pull clicks and valuable web traffic to their page.

FUD-ers may utilize a similar tactic in order to mislead a group of people into believing the coin or token that they invest in is better than a competitor’s project. Often times these posts are submitted without any proof in the hope that people will buy into the fear and just spread these items without doing their own research first.

Valid criticisms do not fall under this definition, especially one that presents evidence of a problem such as a software vulnerability just because you don’t like someone speaking badly about your pet project.

It’s important to distance yourself enough from an investment to be able to give your attention to these negative opinions as well. Otherwise, you may be making a mistake that you could regret later. Try to remember that valid opposing opinions are welcome, but fear mongering that has no basis in reality is not.

Cryptocurrencies as a whole have experienced this from people who claim ridiculous things like that cryptocurrencies are only used by criminals or that world governments will simply ban them. There is no basis for either of these things, and they are simply used as a means to spread fear to people who might be interested in adopting cryptocurrencies in order to scare them out of doing so.

How to protect yourself and your investments from FUD?

The only way to protect yourself here is to be informed. Most developers are very open to reasonable questions about their projects. You could try visiting Discord, Reddit, Twitter or Telegram and asking for clarification about something you’ve heard.

However, you could probably find this information yourself by viewing a coin or token’s white paper. Almost every project has this, and it will tell you everything about how their proposed solution or platform will operate. This will allow you to verify for yourself whether what you have heard is true.

If the item you are questioning is a news item, then try to verify if this item has been reported by multiple sources. If you can’t find multiple news outlets reporting on it, then it may not be true, and you could try asking the developers to acknowledge the post or article for an answer. Typically they will do this on their own, however.

Be aware that even after the project managers have made their statement, there will still be people who will report that news item. Either through ignorance or the fact that they do not want to accept what the truth is, and they hope others won’t either.

What is FOMO?

FOMO is an acronym for the fear of missing out. Investors saw a lot of this during the last bull run when new money scrambled to enter into the market. This boosted cryptocurrency to unprecedented levels, but this kind of growth never lasts. The walls came tumbling down and many people got burned by this fall.

While FUD can cause projects to drop without anything really backing it, FOMO can do the same in the opposite direction. Markets of all kinds operate on the news, and good news can cause spikes just like bad news can, but eventually, these unsubstantiated claims are proven false. However, many tokens and coins are not moving on news items, but may simply be being manipulated, especially those with smaller supplies.

For this reason, investors must be very cautious about coins or tokens that have recently experienced a sharp increase in price. If you buy in at the top of this, then it’s very likely that the market will crash down on you, and you’ll be lost a significant portion of your capital. While it’s easy for a market to spike in price and reach very high levels, it’s much harder to sustain that level.

Buying into a pumping cryptocurrency is a good way to get dumped on by whales, the big investors in this space that control a large portion of the currency. They use these cycles to accumulate more profit, quickly dumping their alt coins before the price can fall. Usually, by the time a casual investor sees the price going down, it’s too late.

How to protect yourself from FOMO

Protecting yourself from FOMO also requires being informed. While it can be tempting to chase profits from a pumping coin, it’s almost always a bad idea, and if you’re a new investor then this is likely the worst thing you can do.

Even projects which are seeing a sharp increase for legitimate reasons such as a new software release or an exchange listing will come down. So, don’t be too discouraged if you missed the price boost.

It’s likely that these assets will experience a correction in the next few days, and you’ll be able to get in at a much more attractive price if you are patient. This strategy will likely treat you much better than trying to jump between currencies chasing profits.

Likewise, if the cryptocurrency you’ve invested in is a little stagnant, you should not sell it only to jump into another coin which is going up. This is a bad move, and you’ll likely not only lose money on the pumping coin when it dumps, but you could also miss out on potential gains from the first project which you had invested in!

Conclusion

In conclusion, there’s much to learn for a new investor, but if you’re prepared you can earn some profits for yourself in cryptocurrency. You should always remember to take any investing advice you get with a grain of salt.

While there are some people on the internet that know what they are doing, there’s even more that will mislead you. Either due to their own ignorance on the subject or even maliciously because they want you to pump a coin that they plan to make profits off of and then dump.

Avoid any groups on Twitter that are offering you fast profits or promising to tell you when a currency will be rising in value. These are what are known as pump and dump groups, and they are trying to use you to make money.

In most cases, you’ll be the one who is getting dumped on. They use these channels to lure in new investors with hopes of quick money, and then use them as the bag holders, quickly selling off their own investments first for profit.

If anyone recommends a project to you, make sure to do all of your own research before putting in any money. Take a moment to read over what it is the project does, who their competitors are, familiarize yourself with their social media accounts, and really evaluate their offering.

If the project looks promising, and you’ve examined the long-term price chart to make sure it’s not overpriced, only then should you consider entering a position. Avoid get rich quick schemes and invest only in solid projects. If you can have a little patience, then your investments will likely offer you a nice return in a year or so.