This great article of Bobby Azarian, cognitive neuroscientist, explains how IOTA is victim of FOMO/FUD since the “Microsoft Partnership” episode. Here is the section that concerns IOTA:
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 to exchange money back and forth like Bitcoin, but instead 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.
The only problem with this revision—which likely made the Squawker article’s fake news claim appear more legitimate in the eyes of readers—is that the collaborations between IOTA and these companies are, in fact, entirely real.
With some investigation one can easily find clear evidence that Microsoft and IOTA had begun discussing how they could establish a working relationship. In the IOTA blog post that introduced the data marketplace project, there is a direct quote from Microsoft’s blockchain specialist Omkar Naik:
“We (Microsoft) are excited to partner with IOTA foundation and proud to be associated with its new data marketplace initiative. This next generation technology will accelerate the connected, intelligent world and go beyond blockchain that will foster innovation real world solutions, applications and pilots for our customers”.
It seems that the word partnership was being used casually here, and was not intended to imply a strategic partnership involving contracts and joint business ventures. While it may not have been the most suitable word to describe the relationship between Naik and IOTA, fault can hardly be attributed to the members of the IOTA foundation. In Squawker’s defense, it was noble of them to state that fact unequivocally in the revised version.
In fact, the final revision of the Sqauwker article actually displays tangible evidence for relationships between IOTA and all the aforementioned companies. It seems that the reporter simply chose to focus on a semantic issue rather than trying to clarify the nature of the relationship between IOTA and its data marketplace participants.
Reuters did in fact incorrectly report that Cisco was an active participant in the data marketplace project, but the mix-up was an honest and easy one to make. The founder of IOTA, David Sønstebø, clarified on Reddit that IOTA cofounded the Trusted IoT Alliance along with Cisco, but that they are not data marketplace participants at present. Reuters swiftly updated their article to reflect this inaccuracy.
I will go ahead and assume the best intentions when I say the Squawker article was a public service announcement and a cautionary word to investors, not an intentional smear campaign. Nonetheless, it was unabashed, grade-A, FUD fodder. The fact that the article appears to be well-investigated on the surface gave FUD spreaders the ultimate weapon to add to their arsenal. In no time, hundreds and maybe even thousands of tweets, posts, and comments spread across the web that expressed sentiments like, “IOTA lied about partnerships,” “Scam,” “Fake news,” and with a daring confidence, statements like, “I knew it” and “Told ya so.”
But the FUD cycle didn’t stop there. The Squawker article had spawned numerous newsletters and blogs summarizing it, warning investors to be wary of IOTA, creating a psychological atmosphere of doubt and causing further dumping of IOTA coins due solely to miscommunications and misinformation.
Even crypto-celeb Charlie Lee, the high-profile founder of Litecoin—the fifth biggest cryptocurrency by market cap (it was temporarily supplanted by IOTA before the FUD)—even joined in on the fun by tweeting, “The Microsoft partnership is fake?” It doesn’t seem quite fair to label something “fake,” since it implies deception and not miscommunication. If anything is to blame for the terminology mix-up, it is the fact that sometimes information gets distorted when it’s turned into headlines.
Charlie’s tweet received a reply that went as far as to imply that IOTA actually paid Microsoft for the partnership. The FUD avalanche was striking to watch in real time, but also baffling, as it was hard to fathom how anyone could actually believe a company of the size and stature of Microsoft would engage in such an agreement.
And with that climax, the FOMO-FUD cycle had run most of its course. Of course, it never truly stops for any coin that has a lot going for it; the FOMO-FUD war wages on closer to equilibrium until new rumors or news surfaces and the cycle starts again.
While the FOMO-FUD cycle might be entertaining to watch, it is important to remember that this isn’t a game, even though it’s being played like one. These fear campaigns have real financial consequences for investors. Those who bought in at IOTA’s peak price and sold when the FUD hit hardest lost almost half their investment. For some crypto ‘whales,’ this would have been hundreds of thousands or potentially millions of dollars; for average Joes, only thousands or hundreds. But for all, it was almost half—and almost half is a lot.
What might be most troubling about the FOMO-FUD cycle is that when it has subsided, what remains is an ocean of conflicting information and exaggerations on both ends of the spectrum, making it almost impossible to distinguish fact from fiction. For example, IOTA founders Dominik Schiener and David Sonstebo tried to set the record straight numerous times in places like the comments section of the Squawker article and on Reddit, but almost no one saw these explanations, as it had become virtually impossible to find the signal amongst the noise:
“Many of the companies that we on-boarded to the data marketplace usually require 2 – 4 weeks to approve official press releases internally. Exactly due this reason we on-boarded these companies first, and they are now starting to work on official press releases on their end (in fact, several are going to be announced before the end of the year, where we will showcase how the data marketplace can be applied to their respective industries).”
It seems that we are entering into a “post-truth” world with cryptocurrencies like we’ve recently seen in the world of politics. First, fake news became a problem when then-presidential candidate Donald Trump referenced bogus articles from right-wing extremist sites that were literally complete fabrications. Then, when reputable media outlets like the New York Times and CNN put a spotlight on the fake news problem, Trump chose to flip the script on them and label all their stories as “fake news”. As ridiculous as the strategy sounds, it worked, and the fear, uncertainty, and doubt Trump instilled in his supporters has them confused about the facts to this day.
The crypto world has seen a similar trajectory. In November, the crypto community at large became aware of a fake news problem when a strategically-engineered FOMO campaign spread false rumors that the Chinese blockchain company and cryptocurrency NEO had partnered with the Chinese government, causing a sharp price surge before a crash when the truth came out. Now, with the case of IOTA, we have seen FUDsters use Trumpian tactics whereby legitimate news is called fake or a legitimate company called a scam. It makes me strongly suspect that we are seeing such dishonest FOMO and FUD, at least partially, because Trump has legitimized truth denial and baseless accusations, empowering swindlers and gaslighters who have found their way into the world of crypto.
A post-truth state of affairs has been damaging to politics and society, and it will also damage the crypto-economy if it is allowed to persist. Similarly, the widespread psychological manipulation of investors through fear campaigns does not help the community grow.
Cryptocurrencies aren’t just a vehicle for increasing one’s wealth. They fund blockchain companies that are creating a technological revolution which will transform the economy and benefit humanity as a whole. They also educate the public by forcing investors to read technical papers and watch interviews that describe how these innovations will impact the world potentially as much as the Internet and artificial intelligence—possibly more.
If we want to see a transformative technology take off and a crypto-economy flourish, those who participate must resist the urge to join in exclusively on one side of the FOMO-FUD cycle. It is fine for someone to be enthusiastic about their investments and the companies they support—it should even be encouraged—but that can be done while remaining realistic about the serious challenges and uncertainties that any new start-up in a nascent industry will inevitably face. IOTA is no exception.
The same goes for journalists, who should disclose if they’ve invested significantly in crypto or have any other conflicts of interest that would reasonably be expected to be divulged. This is certainly not to say that journalists who want to cover crypto should not invest in it—quite the contrary, as I firmly believe that many journalists beginning to cover Bitcoin and cryptocurrencies today have a superficial understanding of the space precisely because they haven’t invested. An investment, even a tiny one, forces one to delve deeper into the weeds of the tech and its practical applications. Being part of the community naturally exposes one to so many discussions and differing points of view that it creates a context around cryptocurrencies that could not come from casual observation alone. Personally, making a small investment in cryptocurrency set me on a journey into a technological realm I didn’t even know existed, and opened my mind to new ideas and possibilities that I would not have imagined otherwise.
To ensure the cryptocurrency movement moves along the right path, we who participate in it must teach ourselves to be skeptical not only of sensationalized statements, but also of skeptical statements themselves. We must be aware of how easily we are manipulated when our fear systems are triggered, and adjust our investing behavior accordingly. Those who have the time should actively try to bring clarity to the discussion when they have reliable information or insight.
If the crypto-community can make these efforts collectively, order will emerge from all the chaos, and a body of more reliable and consistent information regarding distributed digital currencies will attract new investors and enthusiasts who are eager to help bring about the impending global blockchain revolution.