Written By
In recent years, cryptocurrency has taken the world by storm, offering unprecedented returns on investment, while challenging the traditional fiat currencies and providing a headache for state regulators in the process.
The explosion of digital currency into the public consciousness has been a dramatic one, leading to a full-scale outbreak of crypto-mania across the globe, with Bitcoin, Ethereum, Tether, Cardano, Litecoin, and many more, becoming household names.
Such a development has given rise to a whole host of new words and phrases associated with the crypto market, including HODL and FUD. In this article, we will be looking into these two terms – what they mean, and how important they are in understanding crypto trading.
HODL Meaning
When providing a definition of HODL, it is important to understand that the term is actually an abbreviation for “hold on for dear life” and is derived from the misspelling of “hold”.
It first originated in 2013 when a trader with the username GameKyuubi (who was allegedly slightly inebriated at the time) posted “I AM HODLING” on the Bitcointalk forum, before proceeding on an elongated rant about his Bitcoin trading strategy.
GameKyuubi had made the decision to hold his Bitcoin, in the wake of a 39% drop in the price of BTC over the previous 24 hours leading up to his blog post, with his frustrations being echoed by many other crypto traders.
In the fallout from the numerous comments submitted on the forum, HODL became an instant internet meme, and so the term was born, thanks to a typo from a random internet user who ultimately was on a rant.
FUD Meaning
FUD is another commonly used piece of technical jargon found within the crypto world, and is an acronym for the feelings of “fear, uncertainty, and doubt”.
The term itself refers to a particular mindset that is pessimistic in nature, when it comes to a certain asset or market. It is a way of spreading exaggerated negativity about a crypto coin and its future in order to create an atmosphere of uncertainty or fear around it.
After these seeds of doubt are fed into the minds of crypto investors, such a situation usually leads to a drop in price of a certain digital asset or even an entire cryptocurrency space.
The collective term for those who spread FUD is “fudders” and while the FUD can sometimes be justified, most of the time it is used to describe unwarranted negative market sentiment.
The Best Time to HODL
Generally speaking, any specific decisions around holding or selling crypto rest largely on the shoulders of individual traders, depending on their risk tolerance and trading goals.
It can vary between “hodlers” as some may choose to adopt a HODL strategy across the board. This is where they purchase and add crypto to their portfolio, with the intention of keeping them for many months or years before selling.
Others might hold certain coins, at the same time as actively trading others within their portfolio that they view as having less growth potential.
Before making a decision on whether to hold or sell crypto coins, investors should conduct thorough research and due diligence as a first step.
The long-term value of digital currencies remains relatively unknown, and any number of unforeseen events could seriously affect the industry in the future.
When FUD Occurs
There are a number of scenarios that could lead to FUD spreading on the global markets, with fear, uncertainty, and doubt emanating from a range of sources – big or small.
It could simply come from a company missing its latest earning expectations, such as failing to match its sales forecasts, below-par subscriber growth, or in the case of an influential investor taking a short position against a stock.
FUD can also arise from a larger source, away from the direct human influence, such as during health pandemics or via natural disasters like tsunamis and hurricanes.
Moreover, people often exaggerate events and contribute towards an overall culture of fear, which in turn can sometimes lead to significant and long lasting implications for the markets, such as mass selling or panic buying.
The key thing to remember is that, on many occasions, FUD is unsubstantiated, over-hyped, or unfounded, with zero or limited truth to it in the first place.
How to Deal with FUD
When FUD occurs, it is vital that traders are well equipped and prepared to deal with whatever the situation entails – regardless of scale or severity. Some of the best ways to deal with FUD are outlined below:
- Invest time in keeping and updating a trading log
- Keep emotions in check prior to taking any positions
- Set out clear and achievable trading goals
- Get into the habit of regular self-analysis
- Operate a diversified trading portfolio
- Do not panic once fear sets in
- Never make a trade based on fear alone
Concluding Remarks
Trading on the world markets, be it through crypto trading or otherwise, can feel like a rollercoaster ride, with HODL and FUD two inescapable constituent parts.
With regards to HODL, as with any investment, proceeding to sell during times of economic uncertainty can lead to losses, whereas holding tight to an asset could see a price recovery – hence the shrewdness of holding.
In the crypto world, FUD is one of the oldest concepts in the book. It can originate from almost anywhere and be focused on anything at all. The best way to deal with FUD is to properly research and get a fuller understanding of the concept in order to effectively prepare for when such a situation arises.
