Why was He Yi's warning ignored by the market: Analyzing the information trap for crypto investors through the meme coin's sharp rise and fall

On January 21st, Binance Chief Executive Officer He Yi posted on the X platform, directly pointing out a persistent problem in the industry: misinterpretation, rumors, and conspiracy theories are misleading investors into making wrong decisions. Her viewpoint is not baseless but supported by real cases — just around the time she posted, a market turmoil triggered by information distortion was unfolding.

How Information Distortion Becomes a Market Killer

He Yi’s post was in response to a specific incident. Previously, CZ’s comments on Meme coins were taken out of context and misunderstood by the market as “pessimism about Meme coins.” However, CZ’s original intention was: most Meme coins won’t go very far, and only those with cultural value might survive long-term. This is a fairly rational judgment, but it was severely distorted during dissemination.

A Tweet Triggered a Market Storm

The danger of such information distortion was vividly demonstrated in the case of memecoin. The timeline is as follows:

On the morning of January 21st, an official White House tweet mentioned “memes will continue,” which He Yi retweeted. Subsequently, memecoin prices surged dramatically, from a market cap of $3.6 million at 5 a.m. to over $27 million in a short period, an increase of over 600%.

But the story didn’t end there. He Yi later deleted the retweet. This move was interpreted by the market as “He Yi is not optimistic about memecoins,” triggering panic selling. Market sentiment instantly reversed, and investors scrambled to exit.

By January 22nd, the market cap of memecoins fell back to around $12 million. Throughout this process, there was no change in fundamentals; only the presence or absence of a single tweet made a difference.

The Cost to Investors

Data best illustrates the issue. Haze, founder of GMGN, invested $869.50 during the memecoin internal trading phase, acquiring about 1.92% of the tokens. When the market cap rose to $27 million, his unrealized profit once reached $520,000. But due to market panic, he sold all at a market cap of $3.83 million, ultimately realizing only $72,900 in profit.

In other words, because of a deleted tweet, he missed out on nearly $45,000 in potential profit. And he was relatively rational — he managed to escape near the peak. Many retail investors might have bought at the top and been trapped along the way.

Why Are Investors Easily Overcome by Emotions?

He Yi pointed out a key issue in her post: “Investors who like to follow such emotions without verification often become a recurring group of losers in the industry.”

This is not to blame investors but to highlight a phenomenon: in the crypto market, emotions often drive prices more than fundamentals. Moreover, this emotional drive has a high self-reinforcing characteristic.

In this cycle, the most vulnerable are those lacking independent judgment. They buy when they see tweets and sell when they see deletions, completely driven by market sentiment.

The Maladies of the Information Ecosystem

The volatility of memecoins reflects a deeper problem in the crypto market: severe distortion in information dissemination.

In this ecosystem, a single tweet can create a market value worth billions of dollars, and a deletion can wipe out investors’ wealth. All of this is not based on the project’s intrinsic value change but on different interpretations of signals.

He Yi’s mention of “misinterpretation” manifests here as:

• Original information being distorted (CZ’s rational evaluation read as “pessimism”)
• Second-hand information being amplified (He Yi’s retweet understood as “strong endorsement”)
• Signals being over-interpreted (tweet deletion seen as “attitude shift”)

The longer this chain of information, the more severe the distortion. Investors often only see the end of the chain and make decisions based on distorted information.

The Necessity of Independent Thinking

The core advice from He Yi’s post is: don’t follow the crowd blindly. It sounds simple, but in practice, it’s very difficult. Why?

First, short-term market gains are enough to overshadow rationality. Seeing others make quick money by following the trend makes it hard not to be tempted.

Second, information asymmetry. Most retail investors get their information from social media, which is inherently an amplifier of emotions.

Third, the industry lacks effective mechanisms for verifying information. Without consequences for false or distorted information, irresponsible dissemination is encouraged.

Summary

He Yi’s warning points to a harsh reality: in the crypto market, those who make money are often not the smartest but those who can best exploit market emotions. Blind followers are ultimately the ones who pay the price.

The memecoin case perfectly illustrates this. A single tweet, a single deletion, is enough to cause investors to lose hundreds of thousands of dollars. This is not a market efficiency issue but a problem with investor decision-making logic.

The key is that this cycle will keep repeating. As long as there are blindly following investors in the market, someone will exploit information distortion for profit. He Yi’s post is a warning, but the only true safeguard for investors is their own independent judgment.