What is FUD? From May to August in 2020, Bitcoin had months of bullish swings, breaking through the $12,000 mark multiple times. However, each time it broke through it was then pushed back down, placing it in a possible FUD feedback loop. In this article, we will dive deeper into what we think is happening currently in the market.
So there has been a lot of FUD going around in the crypto space. FUD stands for fear, uncertainty and doubt. FUD acts as a reflection of the market sentiment whenever there is a big price-shift. By the way if you want to check out more crypto-terms you can check out our article here.
So back to FUD, FUD occurs quite often when the market is going through a bull market. When the prices are rising, it often divides investors into two categories: one group being investors who think that the price will keep rising and the other group being those who are afraid of the overvalued prices. And of course there is also that group of people who don’t own any and don’t want to miss out. What type of investors do you think are currently dominating the market? Leave a comment down below!
Blockchain analysis firm Chainanalysis published a study in September. The firm believes that sellers were at the front, but their momentum was slowly weakening. The declines where Bitcoin dropped from $12,000 to $10,500 in less than 24 hours shows uncertainty in the market. Chainanalysis’s chief economist, Philip Gradwell, made a clear statement saying that the price changes in the period don’t help to show any trends, but definitely shows that we have passed the peaks in prices. Hence, there was still quite a lot of uncertainty in the market during the period.
Since the drop in Bitcoin prices, the amount of Bitcoin flowing into the exchanges has reached its highest point since July. Let’s take a look at some graphs to see how Bitcoin’s supply had changed.
As seen from the graph above, the amount of Bitcoin held on exchanges increased on August 31st. This suggests that more participants are wanting to sell than to buy.
Meanwhile, trade intensity has been relatively the same with no excessive trade volumes. This signals a lot of uncertainty in the market and perhaps the current price is too high for some conservative buyers preferring to hold onto cash instead. Anyways, it does not matter which group you are a part of as there is still an excess supply of Bitcoin. From the report, it indicates that most of these sellers of Bitcoin are those who have been holding for less than 6 months to one year. And if you think about it, if you had simply just bought Bitcoin at the start of this year, you would have made a 52% profit. Therefore, a lot of investors are looking to pocket this short-term profit and this is probably one of the fundamental drivers for the excessive supply of Bitcoin.
How Long Will the FUD Last?
While it is unclear how long this FUD will last. What we do know is that more and more people are jumping onto the Bitcoin bandwagon. The most classic example of this happened in Hong Kong where numerous other crypto firms attempted to copy a trending front page ad on Apple Daily, as seen below.
FUD With Other Cryptos?
Additionally, it is not just Bitcoin that has been surrounded with all this FUD. Other popular cryptocurrencies like Ethereum and Mantra DAO, a new DeFi platform, have also experienced a lot of FUD. Just within one week of OM’s, Mantra DAO’s native currency, debut, the OM had been listed on 11 top centralized exchanges and many of which are free listings to accommodate community demands. And even by September 2020, the OM remains one of the top-10 volume coins on Uniswap. WIthin just the first 24 hours of listing, the OM token trades comprised over 10% of ALL uniswap volume! While this does not suggest that the token is overvalued, it does show a lot of FUD surrounding other cryptos.
Even though Bitcoin has existed ever since the last financial crisis back in 08’, it seems that Bitcoin’s bullish run has just getting started and its future is definitely looking bright. Before you make a decision to buy cryptocurrencies, be sure to do your own research. If you would like to learn more about cryptocurrencies, be sure to check out our other articles!
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