A quick disclaimer upfront: All information given in this presentation is researched and intended to be educational and illustrative to the specific topic, as always. Any companies, products, people, or other items mentioned do not constitute an endorsement, recommendation, or relationship. Every owner has to do their due diligence, as the decisions and responsibility about any investment lie with the owner. This information is not financial advice.
What is FUD?
FUD stands for "fear, uncertainty, and doubt" and refers to a state in which a pessimistic mindset determines one's behavior on the market.
Regardless of the market situation, one's behavior can be influenced by fearful news, the unknown of future events, and doubts acquired from statements, opinions, or misinformation. The level of knowledge about the market could play into how easily one may be influenced. For example, one exclaiming, "This is the end of all crypto!" may, in fact, create fear in an individual who lacks the knowledge that the recent downward trend on crypto included the whole market and was due to inflation, not that crypto is coming to an end. Decisions are then made as a result of these triggered emotions.
What is FOMO?
FOMO stands for "fear of missing out" and refers to a state in which an optimistic mindset determines one's behavior in the market.
Despite the "optimistic mindset" used to create it, FOMO is not good. FOMO occurs when this mindset is exaggerated, creating an overly motivated emotional response and sense of urgency to invest in something before the opportunity passes. This feeling of rushing into an investment prevents an individual from doing their own research before deciding. Blindly investing in something due to FOMO can and has oftentimes resulted in heavy losses.
How might they affect you?
Some examples of those whose actions and decisions can be influenced by FUD and FOMO are those who assess a situation with little knowledge, those swayed by public messages from influencers without basis or evidence, and those swayed by speech campaigns. In a stressful and fearful situation, one temporarily loses the ability to rationalize and make informed decisions. This can cause extreme results.
An individual can lose potential market positions due to selling as a result of FUD and pay unnecessarily high market prices from buying due to FOMO leading to a loss of monetary value, demotivation, and even psychological impact for those who may have invested more than they could afford to lose or who have difficulties handling losing money.
As mentioned above, FUD and FOMO can have a negative impact. This impact can also affect the individual's reactions and behaviors. For example, holders in a community are sometimes tempted to voice their displeasure through their misperceptions and wrong actions. A positive outcome and a negative outcome of any action without a rational background can create points of contention and lead to resentment among other holders.
How do they affect crypto?
Crypto is influenced by the decisions and actions resulting from FUD and FOMO. With FUD, the value of a currency decreases; with FOMO, it increases. However, these events are typically temporary unless the effects of any actions are done in masses. In masses, both can lead to an artificial reversal influencing the project despite a signal on the market, driving it here based on false claims or ideas. The problem here is that this trend only leads to one: The influence of further holders and the change in the market situation, even if only for a specific period.
Critical thinking VS FUD
While much displeasure, false claims, and the like are dubbed critical thinking instead of FUD, it is important to understand here that it has nothing to do with critical thinking.
Critical thinking is the act of describing a fact negatively or positively, as measured by the rationally realistic situation. It involves looking at individual parts of an action and describing, discussing, and determining them one after the other. The important thing to note is that critical thinking can involve questioning actions and even providing constructive feedback/solutions. What's NOT involved is meeting with aggression, belittling, badmouthing, and continuing to ask a question to which you've already received an answer. Typically when questions are paired with these negative emotions, it is an individual attempting to create FUD.
So how can you distinguish what is what?
If fear, uncertainty, and doubt lead to questioning a rationally explained thing in its thesis, although it is clearly explained in the questioned facts, it is FUD and not critical thinking. As an example, one can take a new pen model. Everyone knows how a pen works, and a simple pen - even if there is no explanation - has no relevant basis for discussion in a simple description of how it works. A critical thinker could address the pen's function to make the tip appear, for example, with a button on the pen or the rotation of the pen. He could also make suggestions about what he would consider more useful. In this same case, a person guided by FUD would not reconsider the function either because he does not have the knowledge base on pen innovation or because other models of pens have not given him a positive feeling, and thus he'd come directly to the conclusion that the pen is defective, too heavy, or that there is no way to make it better.
With this example, you can see that a critical thinker - as the name suggests - thinks along and gives solutions, while a person who follows FUD does not even discuss these issues.
As a special note, it must be said here that a lack of knowledge on a particular subject does not equate to FUD. If someone does not understand something and does not understand a more complex subject, he should discuss this in the form of questions or self-study. But if instead of asking, he claims that it is useless to spend his time because he does not know the subject, we are back to FUD behavior.
FUD and FOMO solutions
FUD and FOMO are both inadvisable and dangerous if you fall too heavily for either side. The biggest problem here is the lack of knowledge, which can be identified and discussed through self-study or with others. It is important to understand accountability here as one should ONLY ever invest what one is willing to lose and, at the same time, always do one's due diligence or own research.
However, we are all humans, and we all feel emotions. These cannot be turned off. There are sometimes situations where fear makes you doubt, or market pressures make you want to buy. What is the best way to deal with this?
With rational thinking. Before you act, you should always know what you want to do or what your options are - for both market situations. It's clear that you have to adjust to a fluctuating, highly volatile market in the modern era, but it's important to decide as much as possible with reason and not emotion because emotions are the worst advisor for one's investments.
This does not happen overnight; it takes time. But with every bear and bull market, situation, and event, you become a little more experienced and know how to deal with it. Because experience makes more sense than reacting directly to the wrong advice or emotionally stressful news, once you get to grips with it, you will quickly realize that a volatile crypto market is not as bad as you first thought.