With the Bitcoin revolution in full force, the cryptocurrency market is also booming. Actually, ‘booming’ might be an understatement—exploding like a supernova is more like it. The crypto-economy is comprised of over a thousand different digital currencies, many of which are essentially offered as a way to buy what amounts to shares in a company that uses blockchain technology.
As hype grows, and FOMO rapidly spreads, it is eventually met by a wave of fear, uncertainty, and doubt—or ‘FUD’ in crypto-speak. Buzz will inevitably fizzle out due to an advisory campaign that starts out as skepticism, evolves into criticism, and if that doesn’t serve to calm the price down, misinformation and personal attacks that defame the character of a coin or company often enter the game. Let us call this fear-fueled pattern the “FOMO-FUD cycle”. Fear drives the price up in one form and down in another.
The crypto-flavor of the week starting off the month of December was a currency called IOTA, which, despite all it has going for it, still fell victim to the FOMO-FUD cycle. IOTA’s price climbed from just over a dollar to well over five in less than a week’s time. This surge was attributed to newly-published articles from major news outlets like Forbes, Reuters, and CNBC, which announced that the IOTA Foundation—a non-profit organization based in Berlin—had teamed up with corporate giants like Microsoft, Fujitsu, Bosch, and Samsung.
IOTA stands out in a sea of cryptocurrencies because it uses a distributed ledger technology that is a variant of the blockchain, known as “Tangle,” which supposedly solves the scaling issues associated with Bitcoin and allows transactions to be made for free. IOTA wants to use the Tangle network not only to exchange money back and forth like Bitcoin, but also as a way for data to be shared and sold instantly and securely across the globe. To jump start this effort, IOTA started the data marketplace project in 2015, but it wasn’t until recently that this initiative became newsworthy, thanks to bigger collaborators.
When the CNBC article hit the web last Monday morning with the headline “Little-known digital currency surges 90% after teaming up with firms like Microsoft,” the FOMO cycle took off like a spaceship. The FOMO spreaders didn’t have to work hard this time. No need to engineer dank memes when you can simply post quotes from mainstream news stories that cited a slew of new partnerships with corporations that are household names. Since the word “partnership” can apparently mean very different things to different people in the context of business, it became easy to portray the relationship between IOTA and its data market place participants—both current and tentative—as something much bigger than a collaboration as part of a “comprehensive pilot study,” as it is unambiguously described on the IOTA blog.
But those who worried that provocative headlines and sensational wording might have exaggerated the scope of these collaborations didn’t have to wait long for the FUD to kick in—and man, did it kick in hard. If FOMO made it rain for investors, FUD caused a drought.
In 24 hours, the price of IOTA tanked from a high of $5.50 to a low of around $3, beginning just after a vitriolic tweet brought up an old security vulnerability in the Tangle network that was discovered by an MIT lab. Of course, the tweet conveniently failed to mention that the vulnerability had since been removed and confirmed as such by the same lab. This may have started the descent, but the price really crashed after the publication of an article on a little-known website called Squawker, titled “PROOF: IOTA Is Falsifying Partnerships With Big Tech”.
As its title suggests, the report casts serious doubt on the legitimacy of the news reported by Reuters and CNBC:
“Everyone is excited over the promise of what these partnerships may bring to IOTA and data decentralization overall. The only problem is, several of these partnerships are not real.”
While the original version of the article directly blamed IOTA for the partnership announcements that Squawker was claiming was “fake news,” they later changed the title to “Proof: IOTA’s Partnerships With Big Tech Not Real,” and added a disclaimer that stated that the author now believes the ‘fake news’ should be attributed to misreporting by the media and not IOTA itself.