The cryptocurrency market fell after the Matrixport report, raising questions about its vulnerability to manipulation and outside influences.
On January 3, the market capitalization of cryptocurrencies fell by more than 6%, resulting in the loss of more than $100 billion in value, a phenomenon that coincided with a research report from Matrixport, a prominent digital asset investment platform.
The Matrixport report speculated that the US Securities and Exchange Commission (SEC) would reject all pending applications for Bitcoin exchange-traded funds, contrary to widespread expectations of approval in January.
The release of the report and subsequent coverage by cryptocurrency news outlets appears to have exacerbated market volatility.
Prominent figures in the cryptocurrency world, such as Will Clemente and Lark Davis, have pointed the finger at Matrixport for sparking a sell-off, highlighting the cryptocurrency market's sensitivity to rumors and news.
Meanwhile, Jihan Wu, co-founder of Matrixport, clarified that the company does not influence its analysts' reports, noting that the broad reaction to the report was unexpected.
Adding to the complexity is that just days before the crash, Matrixport issued an optimistic forecast for the approval of a Bitcoin exchange-traded fund, illustrating the unpredictable nature of cryptocurrency market tendencies.
Let's delve into previous instances where misreporting or information has significantly impacted the cryptocurrency market.
Cointelegraph saga
In October 2023, Cointelegraph, a cryptocurrency news site, tweeted false information regarding the SEC's approval of BlackRock's iShares Bitcoin ETF.
The tweet claimed that the SEC had approved the first Bitcoin ETF. This misinformation had a significant and immediate impact on the Bitcoin market.
Following this announcement, the price of Bitcoin rose by more than 10%, reaching nearly $30,000 – a significant increase from its previous value and a level not seen since early August 2023.
However, BlackRock and the SEC quickly refuted the claim, stating that news of the approval was inaccurate. This denial led to a rapid market reversal. The value of Bitcoin fell again to approximately $28,500 by the next day.
This volatility was further demonstrated by significant liquidations in the market. CoinGlass, a cryptocurrency analysis platform, reported nearly $100 million worth of bitcoin liquidations in the 24 hours leading up to October 17, demonstrating the impact of rumors and misinformation that can shake up the cryptocurrency market.
Other notable incidents
The news of Vitalik Buterin's death is false
In June 2017, the cryptocurrency community was rocked by a hoax that claimed Vitalik Buterin, co-founder of Ethereum, had died in a car accident.
This rumor originated on 4Chan, a platform known for trolls and misinformation. The scam had a significant impact on Ethereum's market capitalization, causing a drop of about $4 billion.
Buterin responded to the hoax in a unique way by posting a selfie with a recent block on the Ethereum blockchain, effectively using the Ethereum network to debunk rumors of his death.
Litecoin is on a wild ride
Another notable example is a scam surrounding Walmart and Litecoin. In September 2021, a fake press release issued by GlobeNewswire falsely claimed that Walmart announced an important partnership with Litecoin.
This sent Litecoin's price up 25% in less than half an hour, jumping from $174 to a session high of $232. Walmart denied this news, which led to a quick correction in the price of Litecoin.
Fake raid news
Tron (TRX) was at the center of a fake news scandal when a Twitter user posted a video suggesting that Chinese police were raiding Tron's offices in Beijing. This led to a misunderstanding that Tron was involved in a scam.
However, Justin Sun, founder of Tron, explained that the police presence was to protect Tron employees from protesters who were upset about a Ponzi scheme that had nothing to do with Tron.
Despite the clarification, TRON's price fell, wiping out more than $100 million from its market value within a few hours before recovering.
Navigating vulnerability
The cryptocurrency market's exposure to fake news and rumors has been a major concern since its inception.
This vulnerability can be attributed to a range of factors, including the rapid transmission of information via social media and digital channels.
Analyst Gavin Brown from the University of Liverpool emphasized the weakness of the cryptocurrency market, especially due to the lack of regulatory oversight. This lack of regulation means that market prices are heavily influenced by emotions, making them more reactive to news, whether true or false.
Moreover, prominent individuals such as Elon Musk and others have also influenced market prices through their statements or endorsements.
Hence, a critical evaluation of news sources and perhaps a stronger regulatory framework is what we need now.
