The media loves catastrophizing losses in the cryptocurrency world… but shilling stocks is nothing new, and for every Apple there’s a Theranos. It’s important to know that every single investment can result in a loss. Witness the complete collapse of MoviePass if you want an example.
MoviePass is a cautionary tale about heeding advice from parties whose own interests may well trump the interests of those whom they advise.
While most of us are aware that cryptocurrency has its share of snake oil salesmen, shills and wannabe experts looking to pump up their own stock, there’s nothing new in the methodology. Stocks have been pumped, dumped, and reincarnated for decades.
Whether it’s a crypto company or a traditional stock, a bad actor can turn a disappointment into a tragedy.
It might be someone in the media, pushing good news about bad projects. (Our own journalists have been offered cash to promote certain coins. They have refused. It’s hard for media outlets to root this out, and outlets such as Forbes have been targeted for “fake news” injected by unscrupulous crypto writers.)
It could be an analyst, paid to shill the coin and issue ‘buy’ signals even when the fundamentals are off.
And there’s also the possibility that the motives are pure, but the market disagrees with the analyst’s findings. Which is why, at Crypto Briefing, we always encourage readers to use our analyses as just one part of their rigorous and comprehensive decision-making. When you #DYOR, you empower yourself and protect your investment.
But with MoviePass, some people made a poor decision: they failed to do their own research, and relied on just one source that they considered authoritative.
MoviePass Collapse Was Brutal
Investors in parent company Helios and Matheson Analytics have watched their stakes drop 99% of their value and at least a few have lost more than $100,000. Compared to this, the bitcoin slump is a walk in the park. Helios is now trading at around $0.05 a share. The certificates are basically toilet paper at this point.
Helios changed its pricing structure… and the new deal was just dire. As subscribers dropped out, Helios flooded the market with new shares to cope with the losses and that tanked the share value. It was a trainwreck of epic proportions.
False Sense of Security in Stocks
This happens. It’s part of the process and too many people have come to think that investment money is a sure thing. A steadily climbing stock market has given the world a false sense of security and the likes of MoviePass are occasional reminders that investment isn’t just a one-way street.
Cryptocurrency can be more dramatic in terms of highs and lows, but we live in a world where anybody can invest, and the MoviePass story shows how little research some people put in before they deposit their life savings.
“I use the analyst research to decide if I am going to buy a stock and after buying it, when to sell,” an investor named only as Ken told Business Insider.
Ken dropped $46,200 on somebody else’s recommendation.
Know When To Walk Away
When the price continued to drop, Ken continued to check the ‘research’. He didn’t just watch his money dwindle to almost nothing. Ken continued to buy more stock. He could have pulled the trigger at any point, taken the hit and got out. Instead, he invested $190,000 in stock that is now worth $200.
Forget the fact that the market isn’t completely predictable. Investing like this is a dangerous game and the only shock is that more people don’t lose hard like this.
Analysts Kept Saying Buy, Buy, As Investors’ Money Went Bye-Bye
Stock trading app Robinhood, famous for not charging fees, has 74,000 investors with MoviePass stock. One recommendation can cause a viral effect and that can be self-supporting. The momentum effect described by Yale University recently means the wave of buyers can send the stock soaring.
Companies know this. Paid analysts know this. Social media stock market celebrities know it better than most. There is a good chance somebody made money out of MoviePass stock, and not just the short brigade. It’s a cautionary tale that you shouldn’t always believe the advice you get on the internet.
Even as the stock price slumped, E-Trade, StockTwits and more recommended buying. Investors snapped up the stock, but the slide just kept going. A brief turnaround, where Helios gained 40%, encouraged existing investors to throw more money at the stock in a bid to capitalize on the sudden spike or at least recover their losses.
Gamblers Chasing Losses
“I looked on E-Trade and noticed the buy ratings,” said one investor. “I thought, foolishly, after seeing a brief 40% increase in the stock from $0.10 to $0.14, that if I invested another $8,500 at $0.11 and it doubled, I would make my money back, or be happy to make 40% back. I was 100% encouraged by the buy rating of the analysts. I invested another $8,500 specifically because of those analysts’ buy recommendations I saw on E-Trade.”
But that 40% peak was a brief window, before the stock fell to the floor. Throughout, analysts were recommending Helios stock. Even now, with the stock on the floor, people are considering it based on those positive reviews as a potential recovery that can gift them a huge profit.
There are seriously people snapping up those 5c stocks, hoping that this time… this time… the company will deliver.
Remember Black Thursday? No Crypto…
On Black Thursday, October 29th, 1929, the New York Times alleged that traders were politely queuing for a window to jump out of. It turned out to be false, but we do know that a lot of people were wiped out. In five hours, the American people lost enough money to fund the First World War.
In retrospect, the build-up to Black Thursday was described as an ‘orgy of speculation’. It’s uncomfortably close to the modern cryptocurrency phenomenon and plenty of pundits predicted the brutal and savage correction that we have seen this year. The only thing we don’t know is when it will come to an end.
The simple fact is that trading is risky and any time you invest, you can win and you can lose. The sheer volatility of cryptocurrency has created billionaires and it has also stripped the shirt from some peoples’ backs. It’s the nature of the beast.
So, be careful who you listen to. We like listening to the pundits and we’ll bring you their thoughts on the next bull or bear. But it’s your money on the line.
Do your own research and don’t be like Ken. There is always a chance you can lose when you bet big on cryptocurrency or the stock market, but don’t lose your house over a random green light on a website somewhere.
The author is not invested in any cryptocurrency at this time.
Editor’s note: Unlike some media outlets in our industry, Crypto Briefing does not accept payment for any review or article.