High rise, quick crash: Why did $LIBRA cryptocurrency's value go on a roller-coaster ride?

A cryptocurrency briefly endorsed by Argentina’s President Javier Milei soared in value and then crashed within hours, taking investors on a roller-coaster ride that ended in losses for many.

Milei promoted the digital token, called $LIBRA, on social media platform X on Saturday (February 15), describing it as an investment tool that would “incentivise the growth of the Argentine economy” and help fund small businesses.

The name of the token, which echoes his party La Libertad Avanza, led to speculation about its legitimacy and connection to Milei’s administration.

“Liberal Argentina is growing!!!” Milei wrote in his now-deleted post. “The world wants to invest in Argentina.”

The boom– and bust

Soon after he published it, a community note popped up under Milei’s post on X, warning users to be cautious, pointing out behaviour consistent with a potential scam.

But the damage was done.

Almost immediately after Milei’s post, $LIBRA’s value skyrocketed, with investors pouring millions into the digital asset. The surge was short-lived.

According to analysts at the Kobeissi Letter, which tracks global capital markets, early holders of $LIBRA began liquidating large amounts within minutes.

“Multiple large holders began liquidating MILLIONS of USD worth of $LIBRA,” Kobeissi Letter said in a post on X. “This included gains of +$4 million or more as $LIBRA rose to a $4.6 billion market capitalisation.”

As soon as investors began cashing out, the price plummeted in what analysts described as a “straight-line” crash.

The term “rug pull” was quickly associated with the token– referring to a type of cryptocurrency fraud where developers hype up a coin, attract investors, and then suddenly disappear with the funds.

‘A global scam’

Javier Smaldone, a computer scientist known for exposing online fraud schemes, called the $LIBRA incident a “global scam.”

“So far, it has been discovered that the profit made is around $107 million,” Smaldone told AFP. “Maybe more.”

Milei backtracks, govt launches investigation

As criticism mounted, Milei deleted his promotional post, distancing himself from the cryptocurrency.

“I did not know the details of the project and after learning about it, I decided not to continue promoting it,” he wrote. “I obviously have no connection with this alleged private company.”

However, opposition leaders, financial experts, and digital security specialists questioned how the president could have promoted a financial product without prior scrutiny. Some accused Milei of inadvertently endorsing what could be a Ponzi scheme.

In response to the controversy, the Argentine government announced a formal inquiry.

“In light of the events, the president has decided to immediately involve the Anti-Corruption Office (OA) to determine whether any improper conduct occurred by any member of the national government, including the president himself,” the Argentine presidency said in a statement Saturday.

A task force has been created under Milei’s office to investigate the cryptocurrency’s launch, as well as any companies or individuals involved in its rapid price manipulation.

With inputs from agencies