Cryptocurrency News

Look on the Bright Side: Crypto Winter Kills Fake Exchange Volume

Make no mistake, the recent decline known as “Crypto winter” has been devastating for industries in the space. While CEOs put a brave face on when facing the public, there’s only so many ways to put a positive spin on laying off over half your work force.

That’s something we’ve seen recently with Steemit, ConsenSys, ShapeShift, and BitHumb, although the latter seems rather surprising. Surely a company with over $1 billion in daily trading volume can afford to hang on to 150 staff members, right?

Fake Trading Volume

Multipe exchanges have been accused of falsifying trading volumes, with varying degrees of evidence. Doing so makes the exchange look like its doing more business and gets its name out there, thus drumming up more business – here’s how it works.

Traders sell and then immediately re-buy a financial instrument, eating the fees to make it look like an inflated number of traders are taking part in trading and that there is more demand for a particular asset than there really s. The process can also be carried out with bots.

It’s called wash trading, and like many practices that are illegal in the traditional financial sector, it’s unregulated and thus totally legal in crypto. One thing we’ve really seen over the years is an influx of professional, veteran stocks and forex traders with an understanding of these manipulation tactics realize that they can take the skills they’ve honed at personal risk and in secret in the regulated markets and apply them to crypto where there are many inexperienced traders to prey upon as well as no regulations.

Exchanges could arguably be turning a blind eye, encouraging, or even orchestrating this type of activity to generate more fees and, of course, attract more traders.

Why Do Exchanges Participate In Wash Trading?

Competition amongst the exchanges is fierce. They are under pressure to seek high-margin activities outside the scope of traditional financial regulations. These activities rely on high volume which equates to higher listing fees and liquidity. Eventually, traders become drawn to higher-volume exchanges, which then facilitates the listing of more trading pairs, creating a cycle of growth.

An even more underhanded reason for doing this is listing fees. Projects spend an average of $50,000 for exchange listing, and many exchanges are created purely in an effort to convince projects to pay them for listings. Faking trading volume is a huge reason to do that – the more trading activty there is (or appears to be), the higher they can charge projects for listing.

“If you’re faking volume, you’re doing it for one of two reasons. You’re doing it to get listing fees, so the founders can get rich off of the poor sods buying the coin thinking there’s interest. Or because you bought the coin and you want the price to go higher. In both cases, you’re committing fraud.”

Silver Linings

One “good” thing about the bear market is that it makes it much harder to hide this kind of activity within a bustling space. In a more cautious trading atmosphere, bad actors can be weeded out, and doing that will stimulate more growth over time.

In the case of BitHumb, for example. the layoffs have already re-opened old allegations of fake trading volume. While nobody is hoping for the bear market to continue, it may be part of a natural cycle that ends up strengthening the cryptocurrency industry and trading ecosystem over time.

South Korean Government Hold First Crypto Debate

According to local reports, the South Korean National Assembly held a crypto regulation debate, which was put together by local cryptocurrency exchanges. Both the government and crypto entrepreneurs debating ways to better the market.

Local crypto exchanges organise the debate

The debate was put together by seven local cryptocurrency exchanges including Gopax, Upbit, Bithumb, Coinone, Coinplug, Hanbitco and Korbit. The discussion brought together key players from the government and the crypto community. Among those who attended was Kim Byung-Wook, a Democratic Party member, representatives for the Liberty Korea and Bareunmirae parties and the financial watchdog, the Financial Services Commission (FSC).

Reportedly, the debate focused on the regulatory scope of the government on cryptocurrencies and need for Anti-Money Laundering (AML), customer protection and Know Your Customer (KYC) practices among other crypto activities.

Before the event, Kim Byung-Wook said,

“There is a debate on the blockchain, but since there is no discussion on the cryptographic exchange, it will be a place to establish measures to protect investors and joint tasks to operate the exchanges safely and efficiently.”

Importance of exchanges and need for regulations

The debate comes a month after the South Korean government and financial authorities officially allowed banks to offer services to crypto exchange and blockchain related businesses.  Despite authorities allowing ban and crypto transactions, small exchanges are still struggling to get banking services from large commercial banks. The debate sought to have the government and relevant official follow up on the matter.

In addition, the debate seeks to explain the importance of crypto exchanges and practical regulatory framework in the country. According to Hankyoreh, a media outlet in South Korea that has assisted the cryptocurrency exchanges in hosting the debate, the government wants digital trading platforms to take upon a critical role in the market. They should be in the front line in providing liquidity to investors and recognize the importance of a transparent and efficient cryptocurrency exchange market for the long-term growth of the blockchain space.

Since the beginning of this year, South Korea has taken an active role in ensuring the growth of blockchain technology. With increased new business in the crypto space, both crypto exchanges and government agencies agree there is a need for regulatory frameworks.

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Interested in more crypto content? Check out Interview with Cryptocurrency Analyst Murad Mahmudov and Hardware Wallet Review: Trezor Model T vs Nano Ledger S

The Psychology of Bull and Bear Markets

For all the talk of adoption, new partnerships, government-issued cryptocurrencies, and ever-increasing mainstream media coverage of the cryptospace, the market is really an emotional beast that can tank at a moments notice.

I’m not saying that to put anyone off – it has historically always rebounded bigger and better than ever, but corrections are hard, fast, and unpredictable. Often a bear market creeps up unrelated to the technical side of things, and like a snowball rolling down a mountain, it can start to build in size and speed until something truly enormous is taking place.

Today the market lost $16 billion in value.

Boom, gone. Arguably this was due to Japan’s FSA issuing six exchanges with business improvement orders resulting in bitFlyer temporarily halting the acceptance of new customers and reviewing current customer ID as part of their new anti-money laundering measures. That alone could easily spook the market and put off the many libertarian investors to whom Bitcoin and cryptocurrency is a way of distancing themselves from the government and taking control of their own finances.

Also people who are, you know… laundering money.

If the FSA’s measures were indeed behind the most recent decline, however, it was likely one of many relatively minor factors that ends up triggering a major event such as that seen today.

Traders can scour the news, read over the charts, and toss the chicken bones and examine the tea leaves, but at the end of the day things don’t always go according to plan.

There are, however, certain common psychological phenomena that commonly occur in any marketplace, and crypto is no different.

Enthusiasm, Greed, Denial, Fear, Capitulation

Sounds kind of scary. These are actually trends seen in the rise and fall of a typical price bubble – however, with Bitcoin and the cryptomarket as a whole, we’ve already repeated this phase several times.

Damn, son.

Greg Schoen sold 1,700 BTC in 2011 only to see the price skyrocket from $0.30 to $8.00. Then to $80, $800, $8,000 – even in this current bear market with BTC at $6,000 as I write, those BTC are worth over $10 million. Gregg was around for many Bitcoin bubbles – according to the ‘Bitcoin Obituaries’ website, Bitcoin has been pronounced dead in the media over 300 times and counting, each time suddenly resurging once again. With each wave of volatility came waves of emotions, pretty much in the same order.

Enthusiasm: Hey, this Bitcoin stuff seems pretty cool. You know, I think it’s actually kinda going somewhere! I don’t know too much about it, but I’m gonna buy in and see where it goes.

Greed: Man, have you seen the Bitcoin charts? This shit is crazy, if I get in now I can retire when I’m 12 and live in a tower made of Lamborghinis stacked as high as the god damn moon!

Delusion: This is it. That $472 I put into Bitcoin is going to make me among the richest beings in the multiverse. When I talk, people will bottle the air around my head and sell it on eBay to feed their children. 1 Satoshi is going to be the new $1 million, and I will be so rich that I literally cannot die.

Denial: Alright, things are taking a bit of a downward turn. You think I’m gonna cash out now? Are you high? Did you not hear that thing I said about my bottled breath being more than you could make in a year, you idiot? It’s just consolidating, don’t stress me out like that.

Fear: OK what the hell. What the hell is this. Do I bail? This is still more than I ever thought it was going to be worth when I got in, but that was then. I’m HODLing this shit until you pry my digital assets from my cold, dead, cryptographically encrypted fingers.

Capitulation: It’s over. I surrender – no lambo tower to the moon, no godlike immortality – this Bitcoin stuff is stupid, and I hate it, and I hate you, and I’m selling my laptop and moving to Alaska to chop trees and drink myself to death.

The Cycle Continues

Here’s the thing about bubbles – they burst, they reform, the cycle continues. No-one can predict when an asset’s value is really “dead” or whether it’s just resting its eyes – the bubble cycle we listed earlier is a variation of a commonly recognized Wall Street cycle in the emotional journey of investors. This can happen on a macrocosmic level as seen in the 2017/18 boom and bust of the crypto market which brought it into the mainstream media at last, but it happens on a much more frequent and minuscule level with market assets all the time as well, even on a day-to-day basis.

People looking to trade cryptocurrencies would certainly do well to learn technical analysis, which in particular is relevant for day-trading – however, it’s important to consider TA in the context of market emotions as well.

In hindsight, investing at the ATH of Bitcoin in 2017 was not a smart move (pfft, not that I would know anything about that), but it’s only when considering the market in terms of the above psychological cycle that such a thing is crystal clear.

Bull markets sweep people off their feet with the infectious greed and/or excitement of making a lot of money, while bear markets pose opportunities as well for those who think they can time the market and read the writing on the wall. In a bear market, there’s the constant risk of catching the falling knife and cutting your hand open (i.e., thinking you’ve bought in at the bottom only for things to, you know…)

Yeah.
At the end of the day, bull.bear market psychology is really interesting stuff that gives us insights not only into the markets but into ourselves as a society. A society of reactionary, greedy, easily terrified, hysteric lunatics. That’s deep.

On Wall Street, the VIX is an actual fear gauge used by traders to literally measure market fear and volatility, and a prominent Wall Street investor recently said that Bitcoin was actually predicting the movement in the VIX charts, an earlier measurement of market fear than the VIX itself.

Anyone interested in learning TA to try their hand at day trading can check out resources like The Chart Guys to get neck deep into trading charts and price indicators, but always remember – the thing that will affect the price more than any other factor is human emotion. Those red and green candles are a brain scan of the collective consciousness of the market as a whole, and you need to be just as good at recognizing the emotions of others as you are at being logical with your own if you want to take part.

Interested in a cool crypto story….check out TOTAL DOMINANCE: The Story of Binance and The Top Secret Hedge Fund That Everyone Knows About.

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The Raven’s Dispatch – The Week in Cryptocurrency – June 21, 2018

BITHUMB HACKED – $30 Million in crypto lost

“Just when I thought I was out, they pull me back in!” Just when we think the bulls are gathering the troops, the hackers (and exchange) bring us back down. One of the largest exchanges in the world, Bithumb, based in South Korea was recently hacked for $31 million. How did that affect the Bitcoin price? Not much. We are still holding that $6000 support, fam.

The top 5 in terms of marketcap remains unchanged but all showed weekly growth as per the Livecoinwatch image below. The overall cryptocurrency market in the past week increased from $279bln to $289bln representing a 3.5% increase in the past seven days. Your bags are not the only ones suffering. EOS is the only in the top 5 which did not recover as well week to week, likely to do with the news of the “constitutional crisis” their block producers are having.

Bitcoin:  BTC dropped 4% to $6772 in the past week as of this post. Even with the news of the Bithumb hack Bitcoin held that strong $600 support and showed signs of life. How many more Bart patterns are we going to see this year? It wouldn’t surprise me if “The Bart” becomes an accepted crypto technical analysis pattern in the future.

Ethereum: Aaaaand it’s back. Or is it? ETH grew 10% over the past week settling at $537 as of this post. I don’t really see many people saying “buy ETH at $500, you will never see it again” on the social media anymore. I wonder why?

TETHER (USDT): Tether is back in the news this week so we figured we would highlight it in this weeks Dispatch. The idea behind Tether to have each USDT token backed 1:1 by USD reserves. By holding a US dollar for every USDT Tether token, Tether claim that the value is pegged to the USD and will remain stable. The very definition of a stablecoin.

This is great for people looking to secure profits from their holdings, and even better for day traders – nobody wants to profit by exchanging one coin for another only to see both plummet in value. This is great idea, unfortunately the lack of transparency from Tether itself has many doubting each token is backed by a US dollar.

There is not much in terms of price to discuss, because Tether should never deviate from it’s value of $1. That’s not the case as you can see below. USDT has deviated from it’s 1:1 pegging of the dollar, most drastically when it came onto exchanges in February 2015 and again between April and June 2017.

What’s new at Crypto is Coming

Square Granted Bitcoin Trading License – Payment processing company Square has been granted a New York BitLicense, which enables them to operate a cryptocurrency exchange and allow New York residents to trade Bitcoin.

Law firm Freeh, Sporkin & Sullivan LLP (FSS) confirms Tether fully backed by USD – The often criticised and controversial company Tether shared a “transparency update” via twitter yesterday.

Total Dominance: The Story of Binance – The exchange has seen meteoric growth, reaching the highest volume of any exchange just six months after launch and valued at almost $2 billion within the same time frame, making it the fastest ever platform to reach ‘tech unicorn’ status.

Crypto Facilities To Launch Litecoin Futures – UK cryptocurrency exchange, Crypto Facilities, is set to launch Litecoin derivatives contracts from Friday, June 22, according to rumours. The exchange will be offering both short and long positions with weekly, monthly, and quarterly maturities for LTC joining Bitcoin (BTC) and Ripple (XRP) futures. The exchange also added Ethereum (ETH) futures last month.

Underdog EOS Block Producers you should root for – The purpose of this piece is to highlight some of the best candidates at risk of not getting enough votes to earn a spot, and why you might want to support them with your vote, to have a more decentralised and stronger EOS network.

EOS BPs heavily controlled by exchanges (2 from Huobi) and other potential issues – Adding to our recent series of posts on EOS, Nic Carter did a quick recap of the current 21 EOS block producers filtering them by organization, % of stake, affiliation with any cryptocurrency institution, geographical legal jurisdiction. Makes sense to vote for those underdog BPs, eh?

EOS leaving exchanges vulnerable to hacks? – Whoa, that’s a lot of heat for EOS  aint it? Crypto enthusiast Emin Gun Sirer put up an interesting thread today on twitter predicting a massive exchange hack in the next 12 months….all because of potential EOS vulnerabilities.

Is this the cryptopocalypse? Visualizing historical BTC corrections – Check out this visual from the crew at howmuch.net. An easy way to put things in perspective and calm your nerves.

Tezos Refusing To Relinquish Funds Unless Customers Reveal Their Identities – Say what?! Tezos, a much-anticipated smart-contracts platform aiming to rival Ethereum with added features such as self-governance, is holding user contributions to the ICO hostage pending completion of KYC (Know Your Customer).

How money flows into and within Crypto (cool visualization) – Cool visual representation of how money flows in cryptocurrency from coinlib.io. Really easy way to view how money comes into crypto from fiat currencies and how it moves within the ecosystem once it’s there.

What Is A Mainnet Launch and which upcoming launches should you keep an eye on – We have a look at what is a Mainnet, why it matters for your investment and the upcoming mainnet launches you should keep an eye on.

How cryptocurrencies compare with Visa and Paypal – This graphic shows how the top cryptocurrencies (by marketcap) compare to VISA and PayPal in terms of transactions per second.

Explaining Augur for Beginners (infographic) – Augur is highly touted project in the cryptocurrency industry. With its launch date approaching, we decided to take a closer look at how the platform actually works. At it’s core Augur is a prediction market built on top of the Ethereum Blockchain.

Bitcoin ATMs around the world (visualization) – Are there any Bitcoin ATMs in your neck of the woods?

Interview: Gregor Zupanc – DAA Fund Manager at ICONOMI – If you haven’t already, check out our latest interview of ICONOMI DAA fund manager Gregor Zupanc. Get some insight into how they select which crypto to include in their fund Solidum Capital.

Bitcoin hash rate spiking to all time high…despite price slump – Miners don’t seem to be worried about the price in the short term with new entrants continuing to enter the market.

Cryptocurrency news from around the internet

Korean crypto exchange Bithumb says it lost over $30M following a hack – Just weeks after Korean crypto exchange Coinrail lost $40 million through an alleged hack, another in the crypto-mad country — Bithumb — has claimed hackers made off with over $30 million in cryptocurrency.

Bitcoin Is Controlled by China, Won’t Disrupt Banks: Ripple CEO – Wow, salty much? Since Coinbase announced Ethereum Classic (ETC) would be the next available coin on their platform the Ripple CEO has been on angry fit.

Here’s why EOS will confiscate your tokens if you HODL for too long – Bad news keeps rolling in for EOS.

Goodbye, Denver Post. Hello, Blockchain – They left The Denver Post amid newsroom layoffs and interference in the editorial process by the newspaper’s hedge-fund owners. And now those reporters and editors are creating their own news outlet, The Colorado Sun.

Research: Tether, Bitfinex ‘Manipulation’ Reason Behind 2017 Bitcoin Price Highs – EOS and Tether can’t catch a break this week. Tether (USDT) has once again become the source of criticism after a new study blamed it for Bitcoin price manipulation in 2017, The New York Times reports Wednesday, June 13.

‘Evolve & Adapt’: Goldman Sachs May Trade Cryptocurrencies, Not Just Futures – My, my, my how times change…In less than 6 months. Investment banking giant Goldman Sachs is getting more serious about launching a full-scale cryptocurrency trading operation.

29% of High Net Worth Individuals Have a High Degree of Interest in Crypto – Capgemini’s 22nd annual World Wealth Report, which tracks investment trends of high net worth individuals, found that more than half of those surveyed have at least some interest in cryptocurrencies.

Nasdaq CEO says ICOs are ‘taking advantage’ of retail investors – Initial coin offerings have serious potential to rip off retail investors, mostly due to a lack of public information, according to Nasdaq CEO Adena Friedman.

‘Selling Crypto Now Is Like Selling Apple in 2001’, Says eToro CEO – Just #HODL

Walmart wins patent for medical records stored on blockchain – Walmart has been awarded a patent for a system that would store a person’s medical information in a blockchain database and allow first responders to retrieve it in the event of an emergency.

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How much do Crypto Exchanges make in revenue *every single day? Graphic

Great graphic from Howmuch.net showing the top crypto exchanges in terms of revenue.

Talk about printing money. Forget shitcoin trading, investing in an exchange was the best move to make during this cryptocurrency craze. Binance, only one year after its launch, is generating $3.5 million in revenue…PER DAY!!! Not sure you could even print money that fast. Coming in second is Korean exchange UPbit with $3.42 million per day. Rounding out the top 5 are Huobi, Bittrex (yup, even with all the declining volume) and Bithumb. And last but not least, Poloniex with $0.07 million per day. Things sure do change fast in the cryptosphere. A year ago Poloniex was top dog, dominating altcoin trading, and not 12 months later has fallen 20 spots.

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