What is FUD, and How Does it Impact Crypto Prices?

If you follow cryptocurrency trends and news on social media, you will see recurring terms and phrases. Phrases like ‘buy the dip’, ‘hodl’, and ‘FUD’ have taken prominence in trading circles. They refer to trader actions and patterns amidst contrasting fortunes in crypto markets. 

Talking of crypto trading, it is a colossal sector today. Leading assets like Bitcoin and Tether have tens of billions of dollars in trade volumes. Crypto exchanges and brokerage platforms like CryptoAltum are at the heart of this commerce. With features like zero commission and an additional 25% on all deposits, traders have cause to utilize this platform. Additionally, high leverage crypto trading adds to the allure with leverage as high as 1:500, which magnifies the capacity of a trader in the market.

The high level of automation compounds these features in modern trading. Software like the Metatrader 5, which CryptoAltum deploys, offers superior execution and analytics far beyond what manual trading can achieve. Accordingly, this platform has been active since 2019 and has established a global audience.

Exploring Fear, Uncertainty, and Doubt (FUD)

Humans are highly social beings. They often follow prevailing trends, whether fashion, politics or even cryptocurrency trading. Fear, uncertainty, and doubt have come to connote the negative effect of investor doubts and fears on prices. FUD can cause prices to tumble unnecessarily.  

FUD has a significant effect on decentralized markets. Fiat currencies have central banks that can increase or constrict money supply or change interest rates. For assets like Bitcoin, the supply is fixed, and prices depend purely on market forces. 

Therefore, when traders panic and start selling off, the effect on Bitcoin is direct. Similarly, optimism and hodling have a positive impact on prices. This direct correlation has made FUD such a buzzword among cryptocurrency traders.

Sources of FUD change constantly. It could be anything from macroeconomic data, institutional investor developments, trading activity by whales, and much more for crypto. Nonetheless, the impact often is lower prices and significant volatility. Predicting FUD itself is an activity some traders engage in because the higher volatility becomes an opportunity. 

Navigating FUD in Crypto Markets

Viewing FUD from a negative lens is limiting. A trader should embrace this phenomenon as a constant feature of cryptocurrency markets. 

Critics will use FUD to lambast cryptocurrency’s instability. However, it has proven resilient through pitfalls and is still more valuable than its first users could ever imagine. 

Nonetheless, you cannot deny the influence of human sentiment on trading. Humans will always look over their shoulders to find out what everyone else is doing. Events in the real world have a significant effect on cryptocurrency traders.

For instance, the Bitcoin mining ban in China caused FUD in crypto markets. However, miners in other jurisdictions gradually took up the mantle, and prices recovered before hitting record highs. Those who went by the FUD and dumped their coin rued the decision within a few months. 

On the flip side, some cryptocurrency tokens are fueled by hype. There is a phenomenon called Fear of Missing Out (FOMO) where people purchase a hot rally on blind optimism that it will continue to rally. 

Therefore, it is vital to conduct a fundamental and technical analysis of a crypto token before making trades. This way, sentimental phenomena like FUD and FOMO will only have a small influence on your trading strategy. 

There are loads of ‘Bitcoin Obituaries’ online declaring Bitcoin on its final leg. Most of these predictions came in 2013 when Bitcoin was reeling from the Silk Road Scandal and 2018 after a devastating bear market. This asset has shrugged these periods to continue operating. Peak FUD was in late2018 when prices went below $4,000, and many who bought Bitcoin at the height of the immediate previous rally sold it off at a loss. 

In day trading, FUD is ever-present. Events and news cycles in blockchain circles have an immediate impact on prices. Therefore, conduct your technical analysis to know how to navigate the FUD.  

Conclusion

FUD is an indispensable aspect of cryptocurrency trading. Instead of focusing on the negatives, a trader should seek to harness market sentiment to their advantage. Trading has its inherent risks but relying on FUD alone can be like chasing the wind. On CryptoAltum, a trader has excellent analysis tools like the MT5 Crypto trader software. These tools, complete with charts and live data can help them navigate FUD in crypto markets.