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The Danger Of Blindly Following Rumors In The Cryptocurrency Market
What did you say? There’s a new coin in town that’s sure to give me 1000X profit for my investment? Cool, sign me up – NOT!
Cryptocurrency is one of the most if not the most speculative market out there. With but a rumor (or a tweet), the price of cryptocurrency, specifically Bitcoin (BTC) would go up or down.
The reason I singled out BTC among all cryptocurrencies is because it is the most influential cryptocurrency out there so whenever the price of BTC fluctuates so does other cryptocurrency.
This is called correlation and every cryptocurrency is affected by it without exception. Yes, even those newly released coins are not exempt from the pull of BTC.
One might hear news of coins going up even during the bullish market but this is because people are FOMO-ing and are rushing to buy these new coins.
Speaking of which, rumors is a tool often used by some people to spread FOMO and/or FUD. Market manipulators loved to use rumors to their advantage because if used properly, rumors could increase or decrease the price of cryptocurrencies in a heartbeat.
Rumors are one of the dangers of cryptocurrency and you should always be wary of rumors so as not to fall victim to these manipulators’ scheme.
Being skeptical is a virtue in the cryptocurrency market. If you blindly follow everything that you hear and sees in the market, you might end with the short end of the stick. In other words, you’ll lose out and get less of what was entitled to you had you have been more careful and skeptical.
Of course, you can’t be too skeptical because if you are you might end up missing a lot of good opportunities in the market. Basically, you need to be always on the guard for scams but at the same time observant enough to sniff out good deals.
That said, doing so is easier said than done. But it’s not like there are no available methods that you can use.
For example, if you have lots of connection in the industry, finding promising projects won’t be too difficult. And even if you don’t have that many connections or friends in the know, there’s still the internet so you won’t really run out of options.
I mean, crypto-related forums and message boards are created for the purpose of sharing information. So if you heard rumors of promising crypto-related project to invest in, you could always find more information in forums – if you look hard enough that is.
To be honest, none of us in this platform need reminding of the fact that not all news are factual and true. But since news is often a source of rumors too, I might as well include it.
It is a fact that news is a good source of information. But whether the news we consume is factual is another thing altogether.
Journalists are known to sensationalize and/or exaggerate news to sell more newspapers, and to get more views and clicks. Meaning, that the news you’ve just read might have been exaggerated out of proportion to the point that the information within it might no longer be accurate.
The best way to ensure the authenticity of the information within news is to cross-reference it with other sources including the original source (if possible). Only by doing this that you could be sure that you’re getting the correct information.
Of course if the original source was suspect from the very start then you might still get the incorrect information even if you cross-reference the sources. But that’s one of the dangers of choosing to get your information from other people.
The best and safest ways to get any information about new crypto-related projects is to get it firsthand. Unfortunately, you’ll need a vast network of connections to do that. As such, most people could only settle for secondhand information.
Remember the "double spending" rumor that went viral late January of this year?
Yeah, that rumor reduced the price of BTC by more than 10%. The 10% might not seem like a huge number but remember we're talking about BTC here so a 10% loss meant thousands of dollars were slashed from the original price.
The extreme volatility, and the fact that the market could easily be swayed by rumors such as the one above was one of the reasons that many still consider the cryptocurrency industry a nascent industry. But considering that the industry is just a more than a decade old, it’s not really that surprising.
Of course, the speculative nature of the cryptocurrency market could be tamed if it was controlled and regulated by the government. But doing so would betray the very principle that governs all cryptocurrency: Decentralization and Freedom.
Obviously, most of us in the industry would not agree to give the control to the government, and for a good reason. If we allow the government to control cryptocurrency then we would be at their mercy.
Sure, the market is currently at the mercy of whales that dictates the prices of cryptocurrencies as they please. But at the very least, these whales won’t destroy the very industry that they help create as doing so would kill the golden goose that lays the golden egg.
Basically, at the current state of the market we could only choose the lesser of two evils.
It also means that while we wait for the cryptocurrency market to mature, we could only live with the fact that it is a market ripe with rumors, FOMOs, and FUDs.