Have you ever wondered why it’s so hard to understand the crypto markets? Even if you research the latest news, things can play out the opposite way.
Maybe the prediction was right, but the timing wasn’t. Maybe you sold before a coin skyrocketed or bought at a peak price.
The question is: are you doing your research, or are you following someone else’s predictions? Because in these markets, there are many incentives in deceiving investors and spreading fake news.
Why Are There So Many Fake News In Crypto?
For you to sell high, someone needs to want that purchase price. If you want to make money, you have two choices:
a. Do the opposite of whatever everyone is doing
b. Convince the majority to do the contrary of what you’re doing
Option A is the investor’s way. Your research allows you to see what others can’t, or at least be the first one to see it. It’s about understanding the market trajectory and what people will do.
Option B targets mass psychology. It’s about making others influence the price based on a belief, which may have nothing to do with reality. Potentially, it can be a scam.
If you want to be in control of your investments (option A), you have to accept that Option B investors exist. They don’t care whether their predictions are true or not, because they earn a lot from those who believe them.
If you wonder why it works, it’s because they have enough money to cause price changes. The easiest way to convince a newbie to buy is to show them a coin that skyrocketed within 24h.
So what does this all mean?
- Big investors can influence market prices and so mass behavior (AKA the whales)
- Big investors typically overhype an investment when they want to sell and catastrophize when they want to buy
- These investments are dangerous. The trend they create may have nothing to do with what the project is worth objectively
- Most of them trade for a living. So they’re always one step ahead of the masses
- When these investors create (fake news), they don’t intend to educate you, but to encourage an action
How Fake Are Fake News?
While big traders do the opposite of this news, none of them is 100% fake. While there’s some truth in what they say, most are exaggerated or lack enough context.
You don’t need many sources to create misleading information. All you need is a mention from a crypto celebrity and give it the interpretation that’s convenient for you. And while correlations may make sense, they can still be wrong fundamentally.
In short, publishers take information out of context to reinterpret it, creating fake news.
The content can be 100% factual, but its connotations may lead to different financial decisions.
It doesn’t take much research to uncover the publishers’ intent. The thing is, most ‘investors’ won’t have the time nor motivation to do it. It looks smarter to trust the guys who researched more than you.
Now, if someone is always ahead of you, and everyone follows the same sources, can you really expect to outperform everyone else?
Before you tell yourself that you’re different, here are three facts you should know:
1. “Reputable” Websites Won’t Cut It
Crypto whales. We know they’re on the markets, and probably behind the fake news too. But who are they exactly?
You can find some names here, but it’s still hard to identify these individuals. Expect there to be over 1000 “whales” owning +40% of the market volume. That’s enough to influence the other 60%, which basically leads to an investment monopoly.
So how does the average investor research the markets? They probably read news on reputable brands such as Binance News, Coinbase, Coindesk, or CoinTelegraph.
These sites, by the way, make way more money from traffic than crypto-investing. With that in mind, it benefits both the company and the investor to have as much content as possible.
Now, you will rarely see Coindesk itself write news articles. Why?
- They get far more content from other people
- Many authors want to write guest posts on these reputable sites
As a result, the company publishes hundreds of posts a month from dozens of different crypto-investors, each of them with a different view of the market.
Just because it’s on Coindesk, that doesn’t mean that Coindesk supports their argument. They can review guest posts and edit them, but they can’t (or shouldn’t) change the message.
While it sounds obvious, it tricks you to think that Coindesk itself favors that argument.
2. Big Traders Want You To Lose (And Think You Are Winning)
The goal of a crypto website is to provide accurate information to build credibility. Eventually, users make better financial decisions and use it as their go-to news site. This helps the company stand out and earn more.
If you wonder why fake news exist, mind that big traders earn far more from investing/speculating than from publishing. If they create content, it’s likely to encourage a behavior, not to educate.
Compared to what they make, it doesn’t cost them much to advertise it everywhere. They want to make sure you see it and feel like you’re getting an edge.
What happens is the contrary.
You will often get into the trend right when it’s about to end. That’s when the shorting comes, followed by panic selling. To learn more about how they do it, we suggest you check these guides: pump-and-dump and short-and-distort schemes.
3. Most “Investors” Don’t Care About The Vision
(speculators, or traders in the broadest sense)
As coin prices increase, you will see more and more posts talking about the future of that cryptocurrency. They mention how early it still is to get into, or how the coin can easily 10X within two years.
It feels like they wouldn’t sell it for anything in the world. It looks like HODL (“hold on for dear life”) is king for most people.
With such a good projection, you expect there to be smart investors who are passionate about the technology and believe in the teams behind it. And while there might be, it’s certainly not the majority.
Most “investors” are just speculators, traders in the broadest sense. They came for the gains, and they’ll leave for the same reasons. Most don’t care about technology and will dump the coin as soon as it starts a downtrend.
If you believe a hodler group will keep prices high, you’ll find a surprise on the next bear market. If it wasn’t for money, most people would never be in crypto.
Regardless of the long-term direction, expect there to be volatility in the short-term, often driven by big names and crypto news.
How To Recognize Fake News
As mentioned, fake news focus on call-to-actions rather than information. When you read their content, you don’t learn how to make better decisions: they decide for you.
Given the number of news outlets out there, you don’t have the time to read each of them. Here are three things to observe to quickly recognize fake news:
1. Vague Headlines And References
Fake news work because of the lack of context. Because of it, that’s the easiest way to recognize them.
Fake news often spins around past events(e.g. “If you bought X in December 2020…”) to attract buyers. And they reference the future a lot too, using expressions such as “pump signal”, “buy if Bitcoin does this”, or “imminent surge”.
One that always appears is celebrity opinions. Elon Musk did this, Mark Cuban said that, and so on. Nobody remembers how firmly McAffee believed in a $1M Bitcoin by the end of 2020, for example:
McAfee: Bitcoin’s Scarcity Will Trigger Its Price to Hit $1M in 2020
Followed by…
‘Worthless Coin’ — McAfee Says He Never Believed Bitcoin Would Hit $1M
And the man claimed to have “never lost a bet.” What would you do?
Mind that the $1M promise happened in late 2017, during the first crypto boom.
Whether it hit $1M or not doesn’t matter as much as the financial decisions it influenced. Millions of speculators thought: BTC is worth over $15K and many billionaires believe in it. If it will be worth $1M, I must buy it right now.
After 2017, BTC falls incredibly and stays there until 2020. Yeah, it may be growing a lot recently. But almost everyone who bought at the peak in 2017 probably panic-sold a long time ago. Why? Because of other people’s interpretations.
Bitcoin has surged by 1400%! We’re still very early! Buy.
Bitcoin has fallen to 1/10th of its price. We lost a once-in-a-lifetime opportunity. Sell!
Anything can be justified. Predicted? Not so easy.
2. Unrelated To The Project Fundamentals
That doesn’t mean you can’t profit, or that these investors have bad intentions. It means that there are more losers than winners. When you trade for the short-term, social influence is a critical factor.
Luckily, that’s not the case with long-term investments. Because a coin price cannot deviate much from its objective value. At least, not for too long.
When thinking about professional investing, technical analysis is the first thing people think about. It’s about where prices are headed based on algorithms and past performance. But does it consider what causes those price changes? That’s Fundamental Analysis.
- What is the project about? What problem does it solve?
- What’s the team behind it? How do they work?
- What are the latest updates? Have the features improved?
- What’s the project roadmap? Have they achieved goals previously set?
- Are they marketing the project? Why are there so many/few adopters right now?
- What’s their competition? Is there another project that solves the problem already?
- Are they trying something new or improving existing features?
Whenever you find these kinds of news, they will affect the price consistently. By adding intrinsic value to the project, the project becomes more valuable (maybe not immediately).
Consider the following events:
- A crypto celebrity says the project isn’t worth buying
- A hacker breaches the platform and steals millions in funds
- An exchange refuses to list the coin
Who wouldn’t want to sell in such conditions? A price dip is inevitable.
The question is: Has the project fundamentally changed?
- What someone thinks doesn’t affect the intrinsic value
- A cyberattack actually reinforces the team focus on security
- A rejection doesn’t affect the project features, nor it prevents the team from applying on other exchanges
Adoption would still increase because bad news is still news. People learn about the project and may buy later under better conditions.
The connotation is to sell right at that moment. But because the value hasn’t changed, you should buy instead, especially when there are upcoming updates. At least, that’s what big investors secretly do.
3. Exaggerated Images/Thumbnails
Advertisers want to get as much attention as possible. And since images get more attention than words, the message is more explicit. What you find on a thumbnail may not appear anywhere in the headline or content.
That’s how you find out the authors’ intent.
How do you know when news is misleading?
- They try to make the decision for you (e.g., “BITCOIN CRASH, SELL NOW!!!!!!!!!”)
- They overload it with emotion (so you can’t think clearly and objectively)
Even if you don’t see the news content, the first image already makes you feel pressured to watch it. It somehow feels wrong not doing what they tell you to do.
Because it’s not easy to go against emotions. Almost every day, people upload content with overhyped faces and attention words (caution, emergency, pump signal…):
And while these in particular might not be fake news, they achieve what big traders want you to do: buy high and sell low.
The Bottom Line
Fake news is everywhere trying to pressure you towards a decision. They want you to believe things will go their way because of their “technical signals.” And although past performance doesn’t determine future results, people keep making the same mistakes in similar situations.
As a last tip, look at the market state right now. How are your investments performing? When was the last time they reached this price?
Unless it’s an all-time high/low, review that time when it happened. Try to find old news and what people believed back then. You may find that this time isn’t that different after all.