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Manipulated News and Market Sensitivity

Investing in cryptocurrency surely is exciting. Your crypto asset could explode overnight – faster than anything in the traditional stock industry, but, keep in mind, the bigger the opportunity the greater the risk. Your favorite crypto asset can lose its value as easy as it was gained. Have you ever asked yourself why?

The crypto market is relatively new and small, so it is understandably volatile. The heavy reliance on speculation in the crypto landscape only adds up to the volatility. So, it truly isn’t surprising your coin can skyrocket or fall down a cliff in a matter of seconds.

Given all that, the cryptocurrency markets are an ideal target for price manipulation, and that can happen in many different ways – be it through a Pump and Dump group, fake sell and buy walls, dark pools or by sheer news manipulation.

But hey, don’t let all of that scare you from participating in crypto! If you educate yourself properly, you too can make the correct approach to the markets and considerably minimize your risks. To help you out, we put together this article to point out the characteristics of manipulated news and their impact on the markets.

Fake news, real consequences

There were times when news sent the whole market tumbling down. In January 2017 the South Korean government called for further regulation of cryptocurrency trading due to its rapid rise in popularity among the local population. Their statements were taken out of context by mainstream media outlets, and many were convinced the country was preparing for an outright ban of cryptocurrency exchanges. Markets went down for as much as 10% while Ripple was down for a whole 25%.

Another notable case of news manipulation happened in June 2017. Back then, the story broke that Vitalik Buterin, the inventor of Ethereum, died in a fatal car crash. The market reacted almost instantly. Contributors started unloading, and it took just six hours for the Ethereum price to drop by 12%. That means that around $4 billion was wiped out of Ethereum’s total value. Vitalik himself had to post a selfie on Twitter to let people know he was fine and that the news was fake, but the damage was already done, and many contributors got their fingers burned.

In cases like this, even mainstream media can play its role in spreading misinformation – in the aftermath of this story, Reuters falsely reported that South Korea’s largest exchange, Bithumb, was raided by police. It went even further when the Wall Street Journal published a misleading article about the SEC hearing on cryptocurrencies, where parts of real information were used to create a false story. News like this spread fear, uncertainty, and doubt among contributors, in turn affecting cryptocurrency markets.

The bigger picture

News manipulation can also be used as one of the methods to artificially inflate cryptocurrencies’ prices. Pump and Dump groups often use the fabricated news to raise the price of an asset, only to sell it to newcomer investors. This was the case at the end of August 2018 with Dogecoin, when information started becoming public that a new Dogeetherium bridge would allow it to gain some of Ethereum’s features. It never happened, but everyone still bought Dogecoin thinking it would blow up in the future. What followed was a 23.27% price increase in the next 24 hours. The resulting rise in prices was based purely on hype, and a sharp decline followed – a clear consequence of a misinformed public.

Another similar situation transpired in September 2018 when media outlets started reporting that Goldman Sachs was planning to abandon its cryptocurrency trading desk. Goldman Sachs CFO, Martin Chavez, later described these reports as fake news, but again, the harm could not be reversed. The price of Bitcoin and other digital currencies took a dive, with the total market cap dropping by $12 billion in an hour. All of the top 100 coins experienced losses in the following day.

Do your own research

Recent events have shown that contributors respond most eagerly to news concerning changes in cryptocurrency regulation as well as the possibilities of bitcoin-trading products similar to traditional security offerings. At the same time, they indicate that fake news can significantly impact the fluctuation in cryptocurrency markets and send billions of dollars’ worth of investments plummeting. This can happen almost instantly, so being up-to-date is crucial if contributors want to keep safe. The reality is that misinformation will continue to exist, and while it does, every one of us should be mindful of the news we consume to avoid making bad decisions.

BLOCKBIRD’s platform can help you easily uncover news manipulation all the while protecting you from making uninformed decisions when contributing to cryptocurrency projects. By using it, you can avoid making decisions that are based on hype or outright lies. So, if you are interested in the advanced news verification methods or simply want to access quality news, you are welcome to sign up and become a part of our movement! 

November 27, 2018, Nejc Horvat