Crypto firms, convened by risk monitoring software firm Solidus Labs, are establishing a coalition to combat market manipulation with an effort to win for trust in the mass nascent digital asset industry, accordingto Reuters.
Participating crypto companies include Coinbase, Circle, Anchorage Digital and Huobi. They will sign the “Market Integrity” pledge, acknowledging the potential for fraud in the cryptocurrency space and the industry’s need to protect investors.
Other founding members include CrossTower, BitMex, GSR, Bitstamp, Elwood, CryptoCompare, Securrency, MV Index Solutions, Digital Chamber of Commerce, Global Digital Finance and CryptoUK.
Kathy Kraninger, Vice President of Regulatory Affairs said:
“It really is about recognizing that you need entities that are focused on a fair and orderly system here, and really trying to prevent the abuses that can happen if you’re not paying attention,”
The SEC, in January, has earlier rejected the Wise Origin spot BTC ETF application from Fidelity Investments, a solid complement to its previous stance that it is not yet ready to have a functional Bitcoin ETF trading on its public exchanges, and will address the potential for market manipulation is also included.
The SEC said the ETF did not meet standards designed to prevent fraudulent and manipulative practices.
While the coalition was formed to act against potential fraud in the crypto space, it remains unclear exactly how the decentralized finance industry will curb bad actors.
Crypto firms, convened by risk monitoring software firm Solidus Labs, are establishing a coalition to combat market manipulation with an effort to win for trust in the mass nascent digital asset industry, accordingto Reuters.
Participating crypto companies include Coinbase, Circle, Anchorage Digital and Huobi. They will sign the “Market Integrity” pledge, acknowledging the potential for fraud in the cryptocurrency space and the industry’s need to protect investors.
Other founding members include CrossTower, BitMex, GSR, Bitstamp, Elwood, CryptoCompare, Securrency, MV Index Solutions, Digital Chamber of Commerce, Global Digital Finance and CryptoUK.
Kathy Kraninger, Vice President of Regulatory Affairs said:
“It really is about recognizing that you need entities that are focused on a fair and orderly system here, and really trying to prevent the abuses that can happen if you’re not paying attention,”
The SEC, in January, has earlier rejected the Wise Origin spot BTC ETF application from Fidelity Investments, a solid complement to its previous stance that it is not yet ready to have a functional Bitcoin ETF trading on its public exchanges, and will address the potential for market manipulation is also included.
The SEC said the ETF did not meet standards designed to prevent fraudulent and manipulative practices.
While the coalition was formed to act against potential fraud in the crypto space, it remains unclear exactly how the decentralized finance industry will curb bad actors.
Bitcoin’s (BTC) price has been in a down-trend since the $69,000 all-time high on Nov. 10, when the the Labor report showed inflation pushing above 6.2% in the United States. While this news could be beneficial for non-inflationary assets, the VanEck physical Bitcoin exchange-traded fund (ETF) denial by the U.S. Securities and Exchange Commission (SEC) on Nov. 12 threw some investors off-guard.
Bitcoin/USD price on Coinbase. Source: TradingView
While the ETF request denial was generally expected, the reasons given by the regulator may be worrisome for some investors. The U.S. SEC cited the inability to avoid market manipulation on the broader Bitcoin market due to unregulated exchanges and heavy trading volume based on Tether’s (USDT) stablecoin.
Analyzing the broader market structure is extremely relevant, especially considering that investors closely monitor meetings held by the U.S. Federal Reserve. Regardless of the magnitude of the upcoming tapering in the Fed’s bond and assets repurchase program, Bitcoin’s movements have been tracking the U.S. Treasury yields over the past 12 months.
Bitcoin/USD at FTX (orange, left) vs. U.S. 10-year Treasury Yields (blue, right). Source: TradingView
This tight correlation shows how decisive the Federal Reserve’s monetary policy has been with riskier assets, including Bitcoin. Moreover, the yield decline over the past three weeks from 1.64 to 1.43 partially explains the weakness seen in the crypto market.
Obviously, there are cother factors in play, for example, the market pullback on Nov. 26 was primarily based on concerns over the new COVID-19 variant. Regarding derivatives markets, a Bitcoin price below $48,000 gives bears complete control over Friday’s $755 million BTC options expiry.
Bitcoin options aggregate open interest for Dec. 17. Source: Coinglass.com
At first sight, the $470 million call (buy) options overshadow the $285 million put (sell) instruments, but the 1.64 call-to-put ratio is deceptive because the 14% price drop since Nov. 30 will likely wipe out most of the bullish bets.
If Bitcoin’s price remains below $49,000 at 8:00 am UTC on Dec. 17, only $28 million worth of those call (buy) options will be available at the expiry. In short, there is no value in the right to buy Bitcoin at $49,000 if it is trading below that price.
Bears are comfortable with Bitcoin below $57,000
Here are the three most likely scenarios for the $755 million Friday’s options expiry. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:
Between $45,000 and $47,000: 110 calls vs. 2,400 puts. The net result is $105 million favoring the put (bear) options.
Between $47,000 and $48,000: 280 calls vs. 1,900 puts. The net result is $75 million favoring the put (bear) instruments.
Between $48,000 and $50,000: 1,190 calls vs. 1,130 puts. The net result is balanced between call and put options.
This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.
For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there’s no easy way to estimate this effect.
Bulls need $48,000 or higher to balance the scales
The only way for bulls to avoid a significant loss in the Dec. 17 expiry is by sustaining Bitcoin’s price above $48,000. However, if the current short-term negative sentiment prevails, bears could easily pressure the price down 4% from the current $48,500 and profit up to $105 million if Bitcoin price stays below $47,000.
Currently, options markets data slightly favor the put (sell) options, thus creating opportunities for additional negative pressure.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bitcoin (BTC) bulls were euphoric when the price soared to $69,000 on Nov. 10 because the 14.5% gain accumulated over five days meant they were in for a $715 million profit on Friday’s options expiry.
However, the 9% negative price move on Nov. 16 caught bulls by surprise, especially since most of the call (buy) options for Friday have been placed at $66,000 or higher. Curiously, that price level has been the exception rather than the norm.
Bitcoin/USD price on FTX. Source: TradingView
Bears might have been lucky because the two negative events happened in the past few days. On Nov. 12, the United States Securities and Exchange Commission denied VanEck’s spot Bitcoin ETF request. But more important than the rejection itself, which was largely expected, was the rationale behind the decision.
The SEC explicitly mentioned their uncertainties in Tether’s (USDT) stablecoin and the lack of ability to deter fraud and market manipulation in Bitcoin trading. Bloomberg senior ETF analyst and cryptocurrency expert Eric Balchunas had already given a 1% chance for approval so the denial wasn’t really a surprise.
Moreover, on Nov. 15, U.S. President Joe Biden sanctioned the infrastructure bill, which mandates that starting in 2024, digital asset transactions worth more than $10,000 be reported to the Internal Revenue Service.
Considering the above scenario, bulls are likely to regret their lack of more conservative bets on Friday’s $1.1-billion weekly options expiry.
Bitcoin options aggregate open interest for Nov. 19. Source: Bybt
At first sight, the $630 million call (buy) options dominate the weekly expiry by 35% compared to the $470 million put (sell) instruments. Still, the 1.35 call-to-put ratio is deceptive because the recent price crash will probably wipe out most bullish bets.
For example, if Bitcoin’s price remains below $62,000 at 8:00 am UTC on Nov. 19, only $68 million worth of those call (buy) options will be available at the expiry. For example, there is no value in the right to buy Bitcoin at $64,000 if it’s trading below that price.
Bears have their eyes set on prices below $60,000
Listed below are the four most likely scenarios for the $1.1-billion Nov. 19 expiry. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:
Between $58,000 and $60,000: 10 calls vs. 3,840 puts. The net result is $220 million favoring the put (bear) options.
Between $60,000 and $62,000: 910 calls vs. 1,950 puts. The net result is $60 million favoring the put (bear) instruments.
Between $62,000 and $64,000: 2,030 calls vs. 940 puts. The net result is $70 million favoring the call (bull) options.
Above $64,000: 2,920 calls vs. 240 puts. The net result is $175 million favoring the call (bull) instruments.
This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.
For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately there’s no easy way to estimate this effect.
Bulls need a 6% price hike to turn the tables
The only way for bulls to profit a significant amount on Friday’s expiry is by pushing Bitcoin’s price above $64,000, which is 6% away from the current $60,400. If the current short-term negative sentiment prevails, bears could exert some pressure and try to score up to $220 million in profit if Bitcoin price stays closer to $58,000.
Currently, options markets data slightly favor the put (sell) options, slightly reducing the odds of a rally ahead of Nov. 19.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
New research has shed more light on the crypto industry’s largest-ever token sale, alleging that foul play may have been afoot during EOS’s initial coin offering (ICO) four years ago.
Researchers from the University of Texas have raised fresh concerns regarding Block.one’s record $4.362 billion ICO for the EOS blockchain in 2017 and 2018. The highly-anticipated project was backed by industry heavyweights including PayPal co-founder Peter Thiel alongside billionaire hedge fund managers Alan Howard and Louis Bacon. The research does not accuse Block.one itself of any wrongdoing and the company has cited a report stating there was no evidence it was involved.
On Aug. 31, Professor John Griffin of the Austin McCombs School of Business and financial analysis firm Integra FEC published their findings in a paper titled “Were ETH and EOS Repeatedly Recycled during the EOS Initial Coin Offering?” — alleging that wash-trading played a key role in EOS’s price discovery. Bloomerbe
According to the paper and outlined in an investigation by Bloomberg, EOS was allegedly wash-traded on the Binance and Bitfinex cryptocurrency exchanges in an effort to artificially inflate the prices. Wash-trading describes the process where an entity simultaneously acts as the buyer and seller at the same asset to artificially bolster volume or manipulate prices.
Griffin wrote that artificial demand from suspect accounts created the illusion of demand for the token and pushed prices up:
“First, it directly manipulated EOS’s offering price upward through the extra buying and inflated the market value of the token. Second, it created the false impression of value of the token which enticed others to want to purchase the ICO token.”
The research allegedly identified 21 accounts that recycled EOS tokens during the ICO. Funds identified as suspect amounted to 1.2 million ETH worth around $815 million at the time. Ether was the sole cryptocurrency used to buy EOS during the year-long ICO.
The analysis claims that Ethereum accounts were created in order to repeatedly purchase EOS over time. It claims that a “significant portion” of the Ether raised during the token sale appears to have been “recycled by transferring the ICO contributions through a series of obfuscating intermediary accounts and finally arriving at Bitfinex.”
“2.895 million Ether ($1.721 billion USD), or 39% of the Ether raised in the crowdsale, are also traced from the ICO crowdsale wallet back to Bitfinex.”
Griffin did not identify the owners of the accounts or point the finger toward Block.one regarding the alleged wash-trading, but noted: “These suspicious accounts accounted for almost a quarter of EOS purchases by the end of the crowdsale.”
Professor of law at Cornell Law School, Robert C. Hockett, said that he worked for more than one month on the story alongside media outlet Bloomberg — which published its findings on Sept. 2.
Worked with the Bloomberg buddies for a month on this one. Rather remarkable story. Vulgar pre-’33 securities scandals are apparently being crudely recapitulated across the crypto space now. https://t.co/Ogu5nSf6oF
— Robert Hockett (@rch371) September 2, 2021
According to Bloomberg, Block.one responded to the paper by referencing a July document authored by law firm Clifford Chance LLP that asserted there was “no evidence that Block.one purchased tokens on the primary market.”
Related:Startup Darling EOS Cashes In Millions Of ETH As ICO Scorn Continues
The same John Griffin published a paper in October 2019 titled “Is Bitcoin Really Un-Tethered?” that claimed the leading stablecoin Tether (USDT) was wash traded to influence Bitcoin prices during the 2017 bull market. Speaking to Cointelegraph in Feb. 2020, the firm behind Tether, iFinex, labeled the claims “reckless and false.”
Manipulation or otherwise, EOS has largely fallen out of favor with crypto traders and investors. Since ranking among the top five crypto assets by market cap in mid-2018, EOS has since tumbled to rank 35th by capitalization.
The token currently trades for $5, down 77% from its April 2018 all-time high of $22.70.
