In the wild, unregulated world of cryptocurrency, fraudsters are getting rich by deliberately spreading false information to affect the price of their holdings using social media, scam news sites, and private chat apps.
In the latest of these scams, last week an imposter Twitter account purporting to be that of John McAfee, the outlandish founder of cybersecurity firm McAfee and admired by many as a cryptocurrency sage, advised buyers to invest in GVT, a new digital coin from Genesis Vision. When the tweet was first broadcast at around 3 p.m. ET, GVT was bought and sold on the market at $30. By 3:04, it was at $45, and trading volume had doubled. But by 3:19, GVT’s price had fallen back to $30.29. The smart money — the early money —had gotten out, leaving the late money holding a bag of now-diminished value.
The total value of the four-month-old GVT currently hovers around $75 million, even after the wild price swings. However, Genesis Vision doesn’t yet offer a single product or service; it has only a slick website and a white paper explaining its intent to build a decentralized, global trading network sometime this year. Even the company’s leadership views the valuation of GVT with a raised eyebrow.
Indeed, the spread of fake news and unsubstantiated rumors is becoming common practice among bad actors looking to prey on novices in cryptocurrency trading. It’s the perfect environment in which to proliferate misinformation; it’s mercurial, confusing, and full of uneducated, overeager traders hoping to strike it rich.
An economist at the University of New South Wales compares the current hysteria to the “irrational exuberance” of the dot-com era where paper fortunes rose and fell based on an illogical, capricious market.
Be careful out there, guys.