FOMO (Fear of Missing Out) is the fear of missing something or being left out of something that others are taking advantage of. With the FUD (Fear, Uncertainty and Doubt), commercial or political strategies are qualified to disseminate negative or biased information which aims to harm a competitor.
Making the right investment decisions in the cryptocurrency market can be hampered by many factors, including FUD and FOMO.
These two terms are firmly entrenched in the lexicon of crypto industry representatives. We tell you what FUD and FOMO are, why they are dangerous and how to determine them.
What is FUD?
FUD is a psychological manipulation tactic used to promote something on the market. For example, marketers are faced with the task of promoting a project. To do this, they use FUD to smear their potential competitors.
The ability to identify FUD is down to a science. For starters, it is important to note that tweets and other messages from anonymous people aren’t always worth trusting. Rumors that have no evidence base remain unconfirmed, which means there is no need to blindly follow them.
Examples of FUD in the Cryptocurrency World
In June 2023, rumors began spreading on Twitter that the largest cryptocurrency exchange Binance and its founder Changpeng Zhao were selling their Bitcoin reserves to back the trading platform’s native token, BNB.
Changpeng Zhao was quick to dismiss the rumors, calling the incident FUD. The rumor that the market’s largest cryptocurrency exchange and its founder are selling BTC could be taken as evidence of Binance and Zhao’s doubts about Bitcoin’s potential for further growth. Therefore, the news could shake investor confidence in Bitcoin’s potential. Its logical result is the sale of cryptocurrencies.
Such FUD could be beneficial for market participants who wanted to discredit Binance and buy BTC at a better price. Zhao himself often, in response to requests to clarify this or that news, limits himself to the number 4 – a reference to a paragraph of his code.
What is FOMO?
FOMO stands for Loss of Profit Syndrome. The term is an acronym for the English words “Fear Of Missing Out” (fear of missing something). The word FOMO in trading refers to market participants’ fear of missing out on possible price increases.
Loss of profit syndrome often pushes representatives of the cryptocurrency industry to make ill-considered decisions, for example, to buy a coin during its active growth, which can turn into a correction at any time.
This syndrome often acts as a factor that drives the price of cryptocurrency to unreasonably high levels. The stronger the FOMO “fire”, the more unreasonably high the cost of the coin can be, and the faster it will fall in the future.
Example of FOMO in Trading
FOMO in cryptocurrency can be tracked, for example, using the Bitcoin Rainbow Chart, which helps determine the fairness of the cryptocurrency price over a given period of time.
In 2021, Bitcoin, followed by the entire cryptocurrency market, went through two FOMOs. The first was at the end of March – beginning of April. The growth was preceded by news about Tesla’s $1.5 billion investment in Bitcoin, as well as the launch of the sale of electric cars for cryptocurrency.
The subsequent FOMO was recorded against the backdrop of the recovery of the cryptocurrency mining market following the completion of the migration of miners from China.
By Audy Castaneda
