By Vildana Hajric
No financial market wants scammers breaching the walls. But now is a particularly bad time for cryptocurrencies to be showing vulnerability to mischief.
A significant spike in Litecoin followed quickly-debunked headlines that Walmart Inc., the world’s largest retailer, had agreed to accept the cryptocurrency as a payment mechanism at its stores. Litecoin’s own verified Twitter account posted a link to the press release in a tweet that was later deleted. Charlie Lee, creator of Litecoin and managing director of the Litecoin Foundation, described the tweet and press release as an “unfortunate situation” in an interview with Bloomberg News.
“The @litecoin handle, we have three people who control that and one of the people this morning, before I woke up, saw the GlobalNewswire [press release] and saw Yahoo News posting it and CNBC posting it and he thought it was true because he didn’t know better,” Lee said. “Pretty soon after that he realized he had made a mistake, that it was fake and he deleted it.”
Ed Moya, senior market analyst at Oanda Corp., said “itchy triggers” contributed to the initial market moves. “There’s this kind of expectation in the crypto space that you’re going to see more companies start to show how they’re going to embrace using cryptocurrencies or blockchain technologies, and it seems that there’s this belief that it’s not a matter of if but when,” Moya said. “And that’s why you have so many itchy trigger fingers here to buy any story that shows there’s a major commitment to cryptocurrencies by a large retailer.”
Major cryptocurrencies gave back their advances after Walmart refuted the news. Litecoin — which rose as much as 33% at one point — erased nearly all its gains. Bitcoin, the largest digital asset, was down 1.7% as of 1:35 p.m. in New York after earlier having advanced roughly 4%. Other digital assets also retreated, with Bitcoin Cash, Ether and EOS all declining.
The surge in Litecoin on the basis of what Walmart described as a “not authentic” press release comes as regulators are increasingly seeking to tighten their grip on the crypto space. U.S. Securities and Exchange Commission Chair Gary Gensler, who recently called crypto the “Wild West”, has signaled that he’s contemplating a robust oversight regime over the still-mostly unregulated industry.
Coinbase Global Inc., the largest regulated cryptocurrency exchange in the U.S., last week lashed out at the SEC after receiving a notice that the regulator would proceed with an enforcement action if the company went ahead with its so-called Lend product. Lend is one of a growing number of yield-earning products on the market that advertise rates significantly above comparable interest-generating accounts at major banks or credit unions.
The headlines about Litecoin and Walmart had spread like wildfire on Twitter, where a lot of real-time crypto discourse occurs. Some crypto backers — though they questioned why Walmart might choose to partner with a lesser-known and lesser-used coin than Bitcoin, for instance — were thrilled to see another big name getting behind the movement.
“This went from being extremely good news for crypto that strengthened the ‘polychain’ thesis to a black eye on the space in a matter of minutes,” said Stephane Ouellette, chief executive and co-founder of FRNT Financial. “Threats of market manipulation have been one of the primary focuses of regulators around these assets and to say this will get their attention is an extreme understatement.”
But Lee, of the Litecoin Foundation, said he didn’t think the scam would necessarily trigger additional regulatory scrutiny. “This happens with the regular stock market also. It happens a lot more with the regular stock market than with crypto. But I’ve seen it happen a few times with crypto,” he said.
Scams in crypto are not new. In the summer of 2020, the Twitter accounts of some of the most prominent U.S. political and business leaders were hacked in an apparent effort to promote a Bitcoin scam. The targeted accounts included Barack Obama and Joe Biden as well as Jeff Bezos and Warren Buffett.
The efforts behind the Litecoin hoax included the creation of an email address based on a sham domain name, as well as a fake news release that included quotes attributed to real Walmart executives. The release had been submitted to a known public relations wire service and was picked up by major news outlets including CNBC, Reuters and Bloomberg News.
While hoaxes that move asset prices crop up in financial markets all the time, cryptocurrencies would seem to provide particularly fertile ground for deceivers. Unlike stocks, trading is mostly untraceable — scammers leave few tracks for regulators to follow. And it doesn’t take much to move the assets. Traders are conditioned to expect hysterical price reactions on flimsy news — like when, say, Elon Musk tweets his approval of a crypto project.
source : https://finance.yahoo.com/news/crypto-market-mischief-follows-week-173625429.html