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Cryptocurrency, which is based on trust, is now plagued by fraud and lies. It is not uncommon for a celebrity's words to lead the rise and fall of the market, and even an unverified event can drive huge market fluctuations. Litecoin (LTC) has recently experienced this.
On September 13th, Eastern Time, GlobeNewsire, a news release distributor under Intrado under Apollo Global Management, reported that "Walmart announced support for online payments with Litecoin." This news was forwarded by Bloomberg, Reuters, CNBC and other media, which ignited the cryptocurrency market. Litecoin rose by more than 37% to $236. Affected by this, Bitcoin once fell below $44,000.
However, there was a reversal. A few minutes later, the official social media account of the Litecoin Foundation, which forwarded the news, quickly deleted the tweet. GlobeNewsire issued a statement saying that reporters and other readers should ignore the press release. Walmart also came out to clarify that it had nothing to do with Litecoin. Within 30 minutes after the "rumor-busting", Litecoin gave up more than 30% of its gains and fell below $180.
This is not just a blunder for Litecoin. Fake news and fraud have been disrupting the cryptocurrency market. According to the survey data of the Federal Trade Commission (FTC), nearly 26,500 crypto fraud cases were reported in the country in 2020, with a total loss of US$419 million, and the loss this year will exceed this figure. In such an ecological environment, comprehensive supervision may only be a matter of time. On September 14, local time, Gary Gensle, chairman of the U.S. Securities and Exchange Commission (SEC), said at a hearing that he is working with other institutions such as the Federal Reserve to clarify the regulation of the crypto field to protect investors.
Litecoin Moment The Litecoin blunder was triggered by the news distribution platform GlobeNewswire. On September 13, local time, GlobeNewswire released a press release stating that Walmart, the world's largest retailer, has reached a partnership with Litecoin and will include Litecoin in its payment methods starting in October.
Although Walmart's official website did not make any official statement and its official social media account did not forward the news, after Litecoin's official social media released the news, the "positive" effect was repeatedly amplified after being forwarded by mainstream media without confirmation. Litecoin once rose 32.8% to US$235.88 per coin.
Walmart urgently refuted the rumor, saying that its cooperation with Litecoin was pure fake news and that it was investigating the release process of the fake news. "Walmart knew nothing about the press release issued by GlobeNewswire. Walmart has no relationship with Litecoin. If you have any questions, please consult GlobeNewswire." The Litecoin Foundation also deleted the related content that it had forwarded before. In an interview with Bloomberg, founder Charlie Lee described it as a mistake caused by staff "due to excessive excitement."
The rally lasted less than half an hour. Within 30 minutes after the rumor was debunked, Litecoin gave up its gains and fell below $180 per coin. According to data from Bitcoin Home, within 24 hours, Bitcoin liquidated $216 million and Litecoin liquidated $21.6527 million. Within 24 hours, more than 100,000 people were liquidated in the cryptocurrency market. Litecoin 24-hour market/data source: Coindesk
"We will cooperate with the relevant authorities to conduct a full investigation," GlobeNewswire said. "Please note that journalists and other readers should ignore this press release." At the same time, Charlie Lee also claimed that the fake news had nothing to do with the Wright Foundation, and the Wright Foundation would do its best to prevent the spread of fake news. Regarding the outside world's hype, he explained that he only had about 20 Litecoins and had no motivation to participate in such a plan to increase the value of cryptocurrency.
According to CoinMarketCap data, Litecoin ranks 19th among the world's most valuable cryptocurrencies. And according to Charlie Lee, although not as popular as Bitcoin, Litecoin is being used for payments. "It is estimated that about $3 billion worth of Litecoin is sent every day, most of which is used for transactions. In the past 10 years of its life cycle, Litecoin has sent more than $1 trillion worth of value through the network."
In a financial market flooded with fake news, coupled with the frequent actions of institutions, it is not surprising that the news that Walmart allows Litecoin payments enjoys such credibility.
Walmart officially posted a job posting in August, saying it was recruiting a digital currency and cryptocurrency product manager to develop digital currency strategies and product roadmaps, and to be committed to product roadmaps and promote project execution. The position requires applicants to have experience in the cryptocurrency ecosystem and related technologies, and more than 10 years of product or project management, technology commercialization experience, etc.
On July 22, local time, Amazon released a job posting for a digital currency and blockchain expert. According to the content, this person will join its Seattle payment team and be responsible for developing "Amazon's digital currency, blockchain strategy and product roadmap." With this statement, the market began to speculate that Amazon may allow customers to use cryptocurrencies. Partly influenced by speculation about this possible move, the price of Bitcoin jumped to $40,501.70 on July 26, reaching its highest level since mid-June, up about 14.5% on the day.
However, a week after the job posting, Amazon said that although the company was interested in this field, speculation about Amazon's specific plans for cryptocurrency was not true.
It is not just Litecoin. Due to the verticality and relative niche nature of cryptocurrency media, the distribution of press releases is often concentrated on websites such as Coindesk and NewsBTC. Information is thus repeatedly circulated and self-confirmed and fermented in a limited space.
Regarding this incident, Intrado, which manages GlobeNewswire, stated that this situation has never happened before and that it has taken enhanced authentication steps to prevent similar incidents from happening again in the future.
"I have some ambivalence towards this kind of fake news," a cryptocurrency investor told the reporter. On the one hand, good news can help push up prices, and selling can make a lot of money. "But on the other hand, many investors have fallen into it and suffered heavy losses."
"With the influx of major mainstream institutions and people's expectation that cryptocurrencies will eventually be regarded as a medium of exchange, it is expected that there will be more scams or fake news in the cryptocurrency field," said an individual cryptocurrency trader. "Especially, with the partial pressure on the stock market, the attention to cryptocurrencies has skyrocketed, and speculation has also surged. We have become accustomed to the latter's price rising and falling sharply due to a sentence or a guess."
She also added that individual investors are very likely to be involved in fraud cases and suffer heavy losses due to their lack of information discernment and avoidance measures. "Unlike stocks, most trading activities in this field cannot be tracked, cryptocurrency participants are anonymous, and many transactions are transferred to personal accounts and may not enter the market."
Wang Haifeng, senior researcher at OKLink Research Institute, told the 21st Century Business Herald reporter that due to the relatively weak trend of the crypto market recently, traders and institutions are mostly waiting for the market to give a clear direction. The news last night was released by a number of leading overseas media outlets, coupled with the actions of the Wright Foundation on social media, which stimulated market sentiment and triggered a chain reaction, causing a short-term huge shock in the crypto market.
"In fact, it is not just the crypto asset industry, the stock and commodity markets also often have all kinds of blunders and true and false news," he said. As the volume of crypto assets continues to expand, the media has increasingly exposed and paid attention to crypto assets such as Bitcoin, but the market has not yet deviated from the characteristics of the "Wild West" in many aspects. Therefore, we also need to have a clearer understanding and judgment of the information we receive and remain rational.
Even in highly regulated areas such as the stock market, there is no shortage of scams and frauds. However, due to the significant price volatility of crypto market assets, it may only be a matter of time before authorities in various countries impose more comprehensive supervision on them.
John Wu, a crypto expert, former venture capitalist, and president of Ava Labs, reportedly pointed out via email that fake announcements are nothing new, “but such high-profile behavior by scammers shows that the old ways no longer work, and the crypto industry needs to take itself more seriously.”
“Unfortunately, this incident will scare off those who are skeptical of cryptocurrencies and fuel the narrative around volatility and instability,” wrote John Wu, but thankfully it will only set us back a few weeks or months, not years.
More comprehensive regulation may only be a matter of time According to data from the U.S. Federal Trade Commission (FTC), 2021 will be a record year for investment fraud, following the $419 million in losses from cryptocurrency scams in 2020. In the first quarter of 2021, the FTC received 14,079 fraud reports, with losses of $215 million during the same period.
Investment fraud in the United States from 2007 to the first quarter of 2021/Data source: Federal Trade Commission (FTC)
According to a survey by Motley Fool, a data media organization, cryptocurrency is now the preferred method for investment scams and fraud. "Previously, wire transfers were the most commonly used payment method. But the convenience of using cryptocurrency to transfer funds and the growing popularity of cryptocurrency as an investment tool have made it a major means of fraud."
As expected, this incident will further catalyze regulatory measures on cryptocurrencies. At a Senate hearing held on September 14 local time, Genles said that he had asked the SEC to work with other domestic regulators in the United States and with the help of Congress to strengthen investor protection in multiple aspects such as the provision and sale of cryptocurrencies, crypto trading and lending platforms, stablecoins, and crypto asset custody.
"Currently, much of the crypto space is not within the regulatory framework to protect investors, prevent illegal activity, and ensure financial stability," Genles explained, and this asset class is rife with fraud and abuse in some applications. The SEC is working with the U.S. Commodity Futures Trading Commission (CFTC), as well as with the Federal Reserve (Fed), the Department of Treasury, and the Office of the Comptroller of the Currency (OCC) to clarify jurisdiction to protect investors. On August 5, local time, Genles sought the support of Senator Elizabeth Warren, saying that lawmakers should give regulators clear powers to set rules for exchanges, including decentralized finance (DeFi) trading venues.
Wang Haifeng pointed out that compared with the traditional market, the history and volume of crypto assets are still in their early stages, and the lack of regulation and transparency has always been a pain point in the industry, hindering the development of the industry. "Since the beginning of this year, global regulation of the crypto asset industry has been put on the agenda and even accelerated. Including the recent statement by the Indian government that it will impose taxes on crypto asset transactions, and the Japanese financial regulator FSA will regulate NFT tokens. Although these regulations may cause short-term pain in the industry, they will also further improve the compliance of the industry, thus laying the foundation for the future development of the industry." (21st Century Business Herald) |
