Crypto market vulnerable to news misinformation: Expert

'Crypto space no stranger to fake news events, prices overly influenced by sentiment,' says analyst Gavin Brown.

Crypto market vulnerable to news misinformation: Expert

The cryptocurrency market is highly vulnerable to media misinformation, an analyst told Anadolu Agency on Thursday, speaking in the wake of a fake news report that rocked markets and spooked some investors.

"The crypto space is no stranger to fake news events," Gavin Brown, an associate professor in financial technology at the University of Liverpool, said in an email interview.

"This is largely caused by the lack of regulatory oversight, and acceptance of cryptocurrency, which consequently means that market prices are overly influenced by sentiment, both on the way up and on the way down," he explained.

On Monday a fake news story carried by outlets such as Reuters, Bloomberg, CNBC, and many others claimed that Walmart, the US’ largest retailer, had partnered with Litecoin, and would be accepting it for payments.

Walmart quickly denied the news, and the outlets rushed to issue retractions, but the crypto market was rattled and many investors took their frustration to social media.

On the back of the fake news, the price of Litecoin climbed from $175 to as high as $240 – up over a third in just minutes, before falling back down to earth.

Brown said it would be "speculation to reason whether this (false reporting) was done deliberately or not."

"All we can say is that in mainstream equity and debt capital markets, such material market manipulation is an offense. The motivation is always profit!" he said.

'Excessive price volatility'

The prices of cryptocurrencies have been fluctuating more recently, with news and tweets from companies and prominent businesspeople, such as Elon Musk, the mediagenic Tesla CEO.

Musk's support for Dogecoin spiked the price of the previously unknown digital coin sky-high, from less than $0.005 in January to $0.74 in May – a whopping 14,700% increase.

The price of Bitcoin, the world's largest cryptocurrency by market cap, has also been vulnerable to price shocks, losing more than half of its value in just a few months.

Bitcoin fell 54.4% to $29,341 on July 20, from its record high of $64,374 on April 14, according to official data.

Although the global cryptocurrency market's total value climbed on Aug. 16 above $2 trillion for the first time in three months, according to data by digital asset price-tracking website CoinMarketCap, prices have been facing very high volatility since then.

"Bitcoin routinely trades through periods of excessive price volatility,” said Brown.

“This present phase appears to have been triggered by El Salvador implementing their previous decision to adopt Bitcoin as legal tender," he added, referring to the Central American country’s move to start Bitcoin’s use on Sept. 7 after its decision this June.

"I am cautiously bullish on Bitcoin and crypto prices in the context of COVID-19 and continued excessive quantitative easing accompanied by low near-negative yields in traditional asset classes," he added.

Brown noted that his year-end prediction for Bitcoin is $55,000 with similar proportional gains across altcoins as well.