You’ve seen it time and time again. A new coin, NFT, or other crypto project is announced, and speculation runs wild. Will this go to the moon? Is it a scam? What should I do?

Among the speculation and hope, voices of negativity inevitably also take root. We’re here to help you navigate these situations and know how to recognize signal from the noise.

What Is FUD?

FUD, a.k.a fear, uncertainty, and doubt, has been part of the financial world for decades and was coined because of IBM’s sales strategies in the 1970s to discourage people from buying competitors’ offering.

The mass adoption of communication platforms such as Twitter, Discord, and Reddit has allowed FUD to become more prevalent than ever with lightning speed to large audiences.

Why Do People FUD Projects?

FUD, in and of itself, is not always a bad thing. There can be many reasons people wish to ‘sound the alarm’ about a specific crypto project – to name a few:

• An untrustworthy project team 

• A newly discovered and serious vulnerability

• An unfulfilled project roadmap 

• Potential for a rug pull

However, when people speak of FUD, they’re typically referring to disingenuous attempts to artificially sway token prices or harm a crypto project in some other way.

Why would someone do this?

By spreading FUD, individuals and organizations can strategically drive prices downward in order to purchase at a steep discount. Or, project founders and investors could severely damage the progress of a competitor, thus providing a competitive edge and more exposure for their preferred project.

Other improper reasons to FUD might include:

• Upset investors who believe they made a poor decision

• Content creators looking for controversial content

• Internet trolls who enjoy the chaos

FUD vs. Real Concerns

FUD is often the loudest voice in a conversation. The trick is sifting through this noise so you can make informed decisions about which projects to invest in, and which to avoid. 

For example, you may find bots posting on social media or online forums that repeatedly post about a crypto project, saying something like “I’M SELLING MY TOKENS!!” or “Scam project! They will dump you.” 

When you see messages like these without context or evidence (and likely an annoying amount of capitalization and exclamation marks), there’s a chance someone is trying to scare you.

It’s always healthy to retain a level of skepticism about any project. But when you come across comments like this, the key is to ask yourself questions such as: 

• Why are they saying this is a scam? 

• Do they provide credible evidence?

• Are there experts in this space that can corroborate?

• Does this individual have an agenda (for instance, are they a competitor)? 

Asking yourself questions like these can help you determine whether or not you’re looking at FUD or a legitimate concern, and can help you to think rationally before acting on your emotions. 

Finding voices you trust can help you deal with FUD or address real concerns. Speak with a financial advisor who can help you make better-informed investment decisions. Search for reputable sources who are knowledgeable, objective, and transparent about the crypto markets. And, avoid influencers who spend more time trying to hype cryptocurrency than being informative. 

Do Your Own Research or DYOR

As always, it is critical that you do your own research (DYOR). Look around for examples of FUD so you can recognize it more easily. Gather more information about a crypto project by joining their Discord, Twitter, or other social media platforms.

Examine what people are saying in real time on these platforms. Are the community members and developers active on these channels? What are the conversations like (friendly, open and transparent, toxic, objective, etc.)? Do they have a large following of engaged participants (how established are they)? 

Find out who’s behind a project and how much experience they have. Not being able to identify who’s behind a project could be a red flag. The developer might be trying to hide their identity—a common scammer tactic. Visit the project’s website and see if any reputable investors or collaborators are backing the project. Significant, verified backers can be a powerful sign of trust. 

Read the project’s whitepaper (an official document that explains what problems the project solves and how) if they have one. Thoroughly studying it can give you an idea of whether or not the project can deliver on its promises or if it leaves you with more questions.

It is important to be critical of both the good and the bad when researching new projects in the crypto world. Others may speak loudly, but the time and effort you put into doing your research will help you make better-informed decisions.