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Expert blog: Cryptocurrency ‘FUD’ and the media’s negative portrayal of emerging technologies

Dr Andrew Harris, Senior Lecturer in Psychology, Gambling and Risk-taking, explores why we’re fearful of new technology.

Hand about to pop a bitcoin logo balloon with a needle
Negative language can create fear, uncertainty and doubt around new technologies such as cryptocurrency

The recently broadcast Channel 4 documentary, ‘Cryptocurrency: Has the Bubble Burst?’ is arguably part of the wider media’s attempt to join the ‘FUD’ bandwagon. FUD, the acronym for fear, uncertainty and doubt, is regarded as a strategy used in marketing, sales, public relations, and politics as a strategy to create negatively biased sentiment by disseminating negative, dubious, limited, or even false information to appeal to fear.

History is a filled with examples of new ideas and technologies initially being met with protest, obstruction, and FUD, before succumbing to mainstream adoption and improving our lives. Hard to imagine that electricity, something so fundamental to everyday life, was once fiercely opposed and feared (see figure 1). Popular culture often spread fear surrounding electricity in the 19th and early 20th century, likening it to the occult (see e.g., Mary Shelley’s Frankenstein, 1819), quasi-magic, and a threat to life.  It was not until the second industrial revolution, also known as the technology revolution, gained momentum and the general public gained exposure to and familiarity with electricity, that it began to be seen in a more positive light.

More recently, the internet was often passed off as hype, a passing fad, that posed a risk in replacing core elements of everyday life including newspapers, social interaction, and even teachers! Given my current vocation, thankfully, they were wrong so far about the latter(!?). It appears then that normal service is resuming regarding the kind of FUD currently targeting crypto currency as an emerging technology.

Cartoon of people scared of electicity
Figure 1. Anti-electricity propaganda cartoon, 1889, its creator is unknown. The artwork is entitled “The Unrestrained Demon”, referring to electricity itself, which was a relatively recent innovation at the time

The source of this natural tendency to fear new and emerging technology has been the topic of much debate. Several theoretical arguments have been proposed including the Status Quo Bias. This refers to the preference for keeping things in our lives just the way they are, resulting in a reluctance to adopt attitudes and act in a way that change our current situation. Many fears regarding technology also stem from a lack of knowledge. In such cases, the emotional tendency to fear the unknown is perhaps a more evolutionary stable cognitive strategy, in the sense that fear of the unknown results in standing back and watching from the side-line or avoiding all together, rather than running naively towards the unknown.

Perhaps more simply, humans form opinions and make decisions using mental shortcuts known as heuristics. Heuristics are often formed on the most salient and available information to us. When media headlines surrounding new technology are biased towards and laden with FUD, it is not surprising to see negative and fearful attitudes being formed.

A recent example in the crypto world would be Investopedia’s 3 August headline Michael Saylor Quits as MicroStrategy CEO After Bitcoin Losses.  Saylor’s company has adopted a strategy of converting its cash flow into Bitcoin as a better store of value than the US dollar - which has been an inflationary asset since its removal from the gold-standard. It is a long-term strategy. Reading the article in full shows that Saylor has moved to an Executive Chairman position to allow him to focus and put even more energy into the company’s Bitcoin accumulation strategy. The headline, however, suggests Saylor has resigned due to the lack of success of the strategy and is exactly the type of headline that feeds into negatively valenced heuristic decision-making – where we respond to situations with fear and anxiety.

Andrew Harris
Dr Andrew Harris, Senior Lecturer, School of Social Sciences

Negative terminology is also used throughout the Channel 4 broadcast, and indeed elsewhere by the wider media, with terms such as ‘crisis’, ‘crash’ and reference to a ‘bursting bubble’ used frequently to describe the price action and volatility of crypto assets. Indeed, volatility appears to be a main theme of the Channel 4 programme.

Volatility of price is commonplace in almost all assets, albeit with some asset classes generally being more volatile than others, but it simply refers to more routine market behaviour associated with price discovery, corrections, and regression to means. High volatility is not a characteristic unique to the crypto markets and is often seen in the price of emerging assets that challenge the paradigm of existing technology. In the 1990s, when the internet and computing became more public and mainstream, Microsoft and Amazon, for example, saw their share prices grow by more than 50x in a 3-year period, only for the share price of Amazon to drop by over 90% in the next few years that followed.

Such price volatility is to be expected until a technology matures and is deemed viable and sustainable.

A more recent example of such a technology shift playing out in front of us is demonstrated in Tesla, an automotive company that designs and manufactures electric vehicle and battery energy storage units. This technology is challenging the current fossil fuel energy aera, and in fitting with the pattern we have seen it is perhaps not surprising to see the share price of Tesla experience high volatility (as well as the company being the target of the usual FUD). In sum, high volatility appears inherent in emerging technologies and is therefore not a property unique to cryptocurrency, though it is often paired with negative language.

It is sadly true however, that as with many industries, scams and rug pulls do exist. Not all of the dot com companies of the 90s had the long-term utility and credibility of a Microsoft or Amazon. The key is to identify and distinguish which crypto projects represent potential paradigm shifting financial technology from the trash, and with approximately 20,000 crypto projects in existence, this is easier said than done. One of the closing statements in the Channel 4 broadcast regarding investing in the crypto industry is that ‘You have got to do your due diligence and be properly informed’. Never a truer word spoken!

This article is not intended as financial advice. Always do your own research and seek professional financial advice.

Dr Andrew Harris, Senior Lecturer in Psychology, Gambling and Risk-taking, School of Social Sciences

Expert blog: Cryptocurrency ‘FUD’ and the media’s negative portrayal of emerging technologies

Published on 15 August 2022
  • Category: Press office; Research; School of Social Sciences

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