The Dilemma of Misinformation in the Crypto Market

The crypto market has its own unique "The Wolf is Coming" story.

Recently, an unverified "breaking news" has sparked heated discussions on foreign social media. The news claims that China has once again banned cryptocurrency trading, mining, and related services, citing reasons such as financial risks, capital flight, and environmental impact. Numerous well-known overseas financial accounts have shared this news.

For experienced crypto investors, such fake news has become commonplace. The price of Bitcoin has long been immune to such information. However, there is indeed a strange cycle in the crypto market - every so often, there is always a piece of misinformation that has far-reaching effects.

Although people may be accustomed to cyclical news like China's ban, it does not mean they can remain vigilant against all fake news. When enough people believe that a certain piece of false information will affect prices, it truly will affect prices.

China's "ban" is just the tip of the iceberg of how the crypto market is affected by fake news. Looking back at the entire history of the crypto market's development, heavyweight misinformation has indeed influenced the direction of crypto assets. Behind a piece of fake news, there is often a complex chain of information dissemination.

The Evolution of Crypto Fake News: Key Events from Amateur to Professional

2017: Rumors of "death" of Ethereum founder

June 26, 2017, is a milestone in the history of fake news in the crypto market.

On the afternoon of that day, a message appeared on the well-known foreign forum 4chan stating: "Vitalik Buterin has died in a car accident." This crude rumor triggered the first market crash in crypto market history caused by fake news within the following hours. The price of ETH fell from $317 to $216 in 6 hours, a decline of nearly 32%.

Social media is flooded with posts seeking verification, and holders are debating whether they should sell immediately. About 10 hours after the rumors spread, Vitalik himself posted a photo on social media holding the Ethereum block number and hash value from that day to refute the claims, proving his safety through the blockchain itself.

This event reveals a harsh reality of the early encryption world: in an information extremely asymmetric market, the destructive power of an anonymous post can be comparable to an official announcement. Early fake news was often created by amateur players and was often tied to the project founders. The market directly links the personal safety of the founders to the survival of the project.

2018: Goldman Sachs "gave up" on Bitcoin's blunder

When false information is cloaked in a professional guise, its destructive power is even greater.

On September 5, 2018, a well-known business website reported that "Goldman Sachs has shelved its plans for a cryptocurrency trading desk." If Goldman Sachs were to set up a cryptocurrency trading desk, it would mean that its institutional clients could buy and sell Bitcoin through Goldman Sachs, which at the time was seen as an important milestone for the crypto market's mainstream acceptance.

The next day, Goldman Sachs' CFO clarified at a tech conference that this was fake news. But it was too late; in that 24 hours of panic, a large number of investors had already cut their positions and exited. It was reported that the total market value of cryptocurrencies dropped by $12 billion in one hour, with Bitcoin's decline exceeding 6% that day.

2021: The "cooperation" event between Walmart and Litecoin

The fake news about Walmart's collaboration with Litecoin on September 13, 2021, is a premeditated crime.

On that morning, a seemingly official press release appeared on the platform of one of the world's largest news release service providers. The press release announced that Walmart would reach a significant partnership with Litecoin and provided detailed collaboration plans and quotes from executives.

Some crypto media have started to compete in reporting, and even the official account of the Litecoin Foundation has retweeted this message. The market reacted strongly, with the price of Litecoin increasing by more than 30% in a short period.

However, Walmart quickly issued a statement clarifying that this was a false report. Subsequent investigations revealed that there had been unusual Litecoin call option trading in the market 48 hours prior to the fake news release. Manipulators profited millions of dollars from this scam through careful planning.

The terrifying aspect of this incident lies in its high level of professionalism, from registering similar domain names, creating fake press releases, to choosing the timing of publication and utilizing official accounts for endorsement. This is no longer a simple prank, but an organized criminal act attempting to profit through news trading.

2023: A false report incident from a well-known encryption media

On October 16, 2023, the cryptocurrency media industry experienced an event worth reflecting on.

At 1:17 PM, a screenshot allegedly from the Bloomberg terminal circulated in the crypto community, showing that the SEC had approved BlackRock's Bitcoin spot ETF. Seven minutes later, a globally renowned cryptocurrency media outlet released this "breaking news" on its official social media account.

The market reacted rapidly and violently. The price of Bitcoin soared from $27,900 to $30,000 in 30 minutes, an increase of over 7%. $81 million in short positions were liquidated.

However, questions soon arose: why is only this media outlet reporting? Why are the SEC's official website and BlackRock remaining silent?

39 minutes later, the media deleted the original tweet. But the damage was done, and the market experienced a complete cycle of ups and downs in less than an hour.

This incident has sparked intense discussions within the industry. Some believe that when the media prioritizes speed over accuracy, they cease to be media and become tools for market manipulation.

2024: Regulatory agencies are also not immune to hackers.

In January 2024, the SEC's official social media account released a false message about the approval of a Bitcoin ETF. An FBI investigation revealed that the attackers gained control of the account through technical means. The price of Bitcoin briefly rose after the false news was released, but quickly fell again after the rumors were debunked.

In October, the FBI arrested the suspect. Court documents show that this was a premeditated financial crime, with the attacker having established a large long position in Bitcoin before releasing false information.

In the past decade, fake news about cryptocurrencies has evolved from "a mistake made without intent" to "intentional crime." The technical barriers, scale of funding, and degree of organization are all constantly upgrading. Investors may dodge a particular instance of fake news, but it is hard to guarantee they won't fall victim to the next one.

When the Truth is Diluted: New Meaning of Three People Make a Tiger

In the crypto market, tracking the source of a fake news story is often futile.

A typical path for the spread of crypto fake news might be as follows:

1. The initial source is usually small social groups, making tracking nearly impossible.
2. Fermenting in a small circle, starting to add "evidence".
3. The crypto media platform gives messages a "quasi-official" color.
4. Opinion leaders intervene, mostly choosing the strategy of "retweeting but not endorsing."
5. The market starts to react, and price fluctuations in turn provide "market validation" for fake news.

Once the message has been disseminated through multiple layers, tracing it back to its source becomes nearly impossible. Each layer of transmission adds new "details" and introduces new interpretations, until the original information is completely diluted.

In the crypto market, rumors can spread irresponsibly and quickly, while debunking them requires rigorous evidence and logic. Spreading panic or exclusive news may create trading opportunities, but debunking rumors does not yield direct benefits.

Each participant acts rationally according to their own interests, but these "rational" choices, when combined, create a collectively irrational outcome.

The market has been fooled by fake news time and again, but it seems that no one can or wants to break this cycle.

This may be the new meaning of "Three men make a tiger" in the encryption era: it is not that if three people say it, it will become true, but rather that when enough people believe it, it will indeed affect the market. In this process, the truth itself becomes less important.