In the field of traditional finance, statements by public figures are regulated to avoid market manipulation. Authorities such as the SEC (Securities and Exchange Commission) in the United States monitor and sanction actions that may unduly affect the value of assets. However, in the world of cryptocurrencies, this control is practically non-existent. A simple tweet or comment can generate drastic price movements, with no legal repercussions.

In this sense, the key question is: is this regulatory vacuum sustainable in a market that continues to expand?

Disruptive Power: Milei Case / $Libra

A clear example of this phenomenon occurred when the Argentine president, Javier Milei, mentioned $Libra as a potentially beneficial cryptocurrency for the trans-Andean economy. Milei's message included a link to the venture, called "Viva la libertad Project", a clear reference to the president's slogan, who ends all his speeches with "Viva La Libertad Carajo" or VLLC.

Following this endorsement, the cryptocurrency's market capitalization reached over US$4 billion, driven by some 40,000 buyers, according to experts.

In a country where a significant percentage of the population has dabbled in cryptocurrencies as an alternative to inflation -according to according to Chainalysis data cited in the report State of the Crypto Industry 2024prepared by Lemon -, this type of statements can generate unfounded expectations and, consequently, considerable losses for retail investors.

A market exposed to speculation and manipulation

This phenomenon is not isolated. Well-known figures, with their influence on social networks, have repeatedly demonstrated their ability to affect the value of cryptocurrencies.

Elon Musk, for example, with his comments on Bitcoin and Dogecoin, has generated sudden price movements. In addition, celebrities such as Kim Kardashian have been sanctioned for promoting cryptocurrencies without disclosing their contractual relationship with issuers, highlighting the need for greater transparency in the market.

The emergence of memecoinsThe emergence of memecoins, assets created without solid foundations, has driven speculation to extreme levels. Many of these tokens experience dizzying rises followed by steep falls, leaving investors trapped with losses in the millions. The schemes of "pump and dump"where organized groups artificially inflate the value of a token. token and then sell en masse, are a sample of the manipulation that occurs without effective regulation.

Given that politicians and public figures can have a massive audience and considerable influence on market perceptions, the lack of regulations limiting or monitoring their statements represents a risk for both individual and institutional investors. This raises a fundamental question:Should communication in the crypto market be regulated?

As cryptocurrencies gain traction in global financial markets, the need for regulation to minimize the risks of speculation and manipulation becomes increasingly urgent. The crypto market continues to expand, but the lack of controls poses a challenge for individual and institutional investors alike.

Juan Manuel Alessandrini

International Funds Analyst Fynsa AGF