FOMO and FUD. How they work, and how to minimize their effects.
Fear, Uncertainty, Doubt.
These three feelings (abbreviated to the term FUD) describe how negative sentiment can affect market value of a coin, a company or project — or an entire market.
As most of us are very familiar with, FUD is a major force to be reckoned with. FUD can make a brilliant investment taste sour in record time when it hits with full effect.
FUD can occur as a result of legitimate concern, simple misunderstandings, manipulation of sentiment via media, or numerous other ways.
Here’s an example: Bob has invested $10.000 in FUDCoin — the brand new cryptocurrency his colleague hasn’t been able to shut up about for weeks. He finally succeeds at convincing Bob to make an investment — his first crypto investment ever.
The sum of the investment is a little more than he was comfortable with risking but the hope of even higher reward motivated him to risk a bit more than he probably should.
Now imagine that you are Bob. You have just made an investment in a new technology you are just barely starting to grasp, losing the money you invested would hurt you financially more than you can cope, and you wake up one morning only to read the following headline:
“China bans all businesses from trading with FUDcoin”
A very high percentage of us would almost instinctively react something like this in a similar situation; get on an exchange as soon as possible and sell off that fucking FUDCoin ASAP, to minimise losses. When a lot of people react to news like this at the same time it can drive prices down in record time, enforcing the “fear” effect in your brain which will then convince you to sell your investment at a ever increasing loss just go get out fast.
Being new to cryptocurrencies also means that you are also new to the constant wave of FUD-like news articles where coin X is shitted on by either some banker-type, a politician, an old rich guy or all three at once on a weekly basis.
Unfortunately, reacting to news in that manner may seem to be a “common sense” reaction, but it is actually to play into the most obvious FUD schemes.
Lets say for instance that to you, common sense is to pay attention when the CEO of a major investment firm calls a coin you’re invested in a scam. So you sell off, along with many other people reacting to the same statement simultaneously. Resulting in a price dive as there are more people competing for sell orders than buy orders at the same time at the exchanges.
And while the masses are racing to sell off. The same old, way too rich, and devious asshole is buying up the same coin he first created some negative publicity about. Tricking the less experienced (and less wealthy) investors to sell their coins at a unwarranted rebate. It is fucking annoying but it happens a lot.
If you are new to crypto, I would not blame you for such behaviour. Although it is unfortunate, it has been obvious — numerous times — that renowned investors and executives talk cryptocurrencies down for years, garnering attention from major media outlets. A lot of negative publicity creates the FUD effect which causes a price drop.
FUD is our reaction to Social Engineering that targets our economic investments, and feelings surrounding the safety of our investments.
Fear Of Missing Out
FOMO, it’s almost as simple as the opposite of FUD, someone or something builds up your anticipation of a coin or tokens value so much that you are willing to pay over market price to be sure that you’ll be able to grab a portion of that asset before its value is (inevitably, in the mind of a FOMO’er) bound for the moon.
FOMO plays into one of the most widely used social engineering techniques that exists. If you leave someone with the impression that they have to strike at a deal right now in order to get a bargain price that one will never see again, the added effect that one has to react within a certain deadline before an opportunity vanishes makes people take hastily and less thought-through decisions.
The Antidote
The cure for FUD, and how we react to it is training. Education, learning where to get the right facts, and researching your investments in a way that makes you shrug of the next billionaire who talks down on a coin you’re invested in.
I used to work with computer security, and I’ve had many positions within the field over the years. One of the things I did was to train employees at businesses to be aware of the most common threats online, that might end up compromising their organization.
In the crypto community we need to train our newcomers into the market to recognise and resist FUD the same way a company needs to make its employees aware of the most common tells of a phishing e-mail.
This is a huge task, and it is never-ending. But the more resilient the majority of coin and tokenholders are to FUD plays from big investors, companies or similar, the more resilient the entire crypto market will be.
One can compare this to the effect that mining has to the technical security of a blockchain. For every “late adopter” we help understand the risks of reacting to un-nuanced headlines, based only on the feelings they trigger, the more we contribute to cryptocurrency market stability.
With Crypto, it is almost as important to learn about the mechanics of FUD as it is to have proper private key management. There is no use in having the worlds most secure blockchain address if you’re just going to spend all that sweet juicy crypto you store in there on impulse buy’s or sells.
So please share this article with anyone you think might have use of it, and if you are further curious as to how Social Engineering works I would reccommend you to do some research online, or buy some books (send me a DM on twitter if you want reccommendations).
Knowing the ins and outs of Social Engineering and how feelings can affect our decision making in a big way is a major benefit for anyone online, wether they are invested in crypto or not.
Because as long as you don’t think it sounds very sensible to take random investment advice from people who shout them at you while walking down the street, you should probably take that into account when you read FOMO or FUD posts from unknown Twitter personalities, or even well known investors. Because most of the time, they are all just applying ages old manipulation techniques to further their own agendas and to manipulate you to play into their game.
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