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Crypto Exchanges on the Abyss: How Traders are Withdrawn and the Bitcoin Price Manipulated

In the past, much has been reported about hacks and IT vulnerabilities at crypto exchanges. It is not secret knowledge that manipulation and fraud at crypto exchanges are very popular. It is difficult to trust the price movements, because the suspicion that insider trades control the ups and downs is persistent. And rightly so.

Only recently we reported about a conversation between two insiders who talked about the apparently massive price manipulation on the BitMex crypto exchange. Since short positions are now also possible, i.e. bets can also be placed on falling prices, the incentive to manipulate prices is even greater. In addition, it has become even cheaper with the help of levers up to 50 times the invested capital. When the „big Wall Street boys“ enter the market, they can easily manipulate the small and unregulated crypto market.

This is how Bitcoin secret manipulation works

In concrete terms, some actors are said to have succeeded in programming a technical information advantage for themselves. This information advantage enables them to see when market participants placed order orders. Among other things, this Bitcoin secret enables them to find out which brands have been used to place important stop orders: Accordingly, they can see before all other market participants when the house of cards collapses and make a good deal with short positions.

It often happens that enormous price movements whip the market up or down without a market economy cause being identified. Most traders then look helplessly at the Bitcoin price and ask themselves what fundamental or chart technical impulses have triggered the pull effect – without result.

Wash Trading pretends high volume
In addition to individual traders, it is even the stock exchanges themselves that are repeatedly under suspicion of manipulation. For example, the crypto exchange is said to have operated BitForex Wash Trading. In wash trading, the highly frequented buying and selling of assets pretends a high trading volume. This is intended to give the impression to the outside world that the exchange is liquid and secure. In reality, however, it is often only the stock exchanges themselves or groups of traders who play a set-up game with the ignorant investors.

Stock market manipulation: not only in the cryptosoft sector

Although there are also isolated cases of insider trading on regulated stock exchanges, this is not the case to this extent, especially since most markets are significantly larger than the cryptosoft market. Here is the review. The trading turnover for the EUR/USD currency pair, for example, is approx. 3 to 5 trillion US dollars per day. The crypto market, on the other hand, has a volume of just 10 to 20 billion US dollars. On small and unregulated exchanges, which cover small markets, it is much easier to provide movement than on highly liquid, capitalised and institutionalised exchanges. Especially since market power there is distributed among many more players and is less centralised than in the crypto market.

Stock exchanges not very transparent for Bitcoin & Co.
In addition, transparency is significantly higher on regulated stock exchanges and capital can be better allocated. If, for example, major shareholders, persons with insider knowledge or board members of a listed company carry out trading transactions with the corresponding share, they must make them public. If they do not do so, they commit a serious crime. This deterrent effect does not exist in the Bitcoin sector. Insider trading is not a punishable offence. Nobody, if they pay their taxes, needs to be afraid of legal consequences. It is an invitation to all those who do not allow themselves to be held back by moral concerns.

Litecoin’s future viability

Jain assumes that the LTC community has another aberration: namely the assumption that the low transaction fees can also be maintained in the future. However, Jain considers this unrealistic. The transactions would become more and more expensive due to the periodic halving of the block rewards. Although this is also the case with Bitcoin, it does not try to stand out by low transaction fees. LTC will reach its limits as early as 2028 when the number of transactions is no longer compatible with the network’s security mechanisms and low transaction fees:

„If the Litecoin community wants to maintain the current narrative „History of cheap transactions“ (currently 0.0008 LTC per transaction), the number of transactions necessary to maintain the security of the network will exceed the capacity of the network to process these transactions.

It is also a warning signal that Charlie Lee sold all of his LTCs in December 2017, at the height of the crypto-hypes:

„A founder who sells all his property is a massive red flag. Lee cited reasons such as decentralization, financial distance and other conflicts of interest for his sale. Despite his intentions, there is now a misalignment of incentives that reduces his motivation to develop the protocol further. To better achieve this goal, we would have liked him to have limited his holdings or used them to finance further LTC development.“

Jain concludes his cryptosoft analysis with a gloomy outlook for LTC:

„Litecoin has traded between $41 and $358 in the last 52 weeks. With an exchange rate of around 50 US dollars, we consider cryptosoft to be significantly overvalued. In the absence of a viable investment thesis, lack of positive catalysts and strong negative catalysts, we expect LTC to remain significantly underperfomed in the crypto market“.

Here is also the desire father of prognosis. Multicoin makes no secret of shortening LTC, i.e. the hedge fund speculates on a falling LTC price.

Charlie Lee shoots back at crypto trader

For this reason, Charlie Lee also dismissed Multicoin’s article as FUD gibberish circulated by interested crypto trader parties. In an eleven-tweet defense speech, he uses a similar format to Jain’s. Where Jain divided his argumentation into narrative (here: Is Crypto Trader a Scam? Read This Review Before You Sign Up!) and analysis, Lee first names the FUD statement and then his counter-argumentation („TRUTH“).

Lee counters Jain’s postulated lack of unique selling points in LTC with the fact that Litecoin has one of the most secure networks. The security is guaranteed by ASIC miners worth over 150 million US dollars, and LTC dominates the crypt mining market.

Jain’s argument that LTC could become osbolet through new solutions for the scalability of Bitcoin, above all the Lightning Network (LN), does not apply to Lee either: Many LN clients already support LTC because they know its value. Atomic swaps also make it possible for LTC and BTC to be compatible in the Lightning Network.

Lee replies to the statement that LTC as Bitcoin Testnet is not worth 3 billion US dollars:

„Even if Litecoin were to function exclusively as a Bitcoin test network, its value could never be expressed in absolute figures. You have to relate it to Bitcoin. LTC’s market capitalisation is only three percent of BTC’s market capitalisation. That’s not much at all.“

A conspiracy against Litecoin?
Lees Tweetstorm, half argumentation, half LTC advertising, concludes with his response to Jain’s accusation that he had dried up his lambs in December 2017 and has not cared about Litecoin since. Lee replies:

„I work full time for Litecoin and concentrate on the Litecoin adaptation. The proof: The fact that I spend time writing these eleven tweets!

Finally, Lee gathered his church around him:

„Litecoin also has the strongest crypto community.“

Even though Lee never explicitly refers to Jain: His replica obviously refers to the multicoin article. Whether a critical article is sufficient to speak of a „concerted action“ like Lee remains questionable.

Social media giants get blockchain competition

Content creators are increasingly migrating to blockchain-based Facebook and YouTube counterparts. Steemit, DTube and LBRY attract with new payment models and new audiences. This migration increases the quality and quantity of available contributions on the new alternatives. This makes the networks more attractive for new users.

Facebook and YouTube are the news spy

Steemit is a social network in which users are paid directly for the news spy. The Steemite crypto currencies Steem-Dollar and Steem-Power are used for this purpose: The News Spy Review 2018 » Full Scam Check. We have explained exactly how this network works here. There are now about one million steemem accounts. That’s not much compared to Facebook; 120,000 new registrations in March 2018, however, testify to rapid growth.

The DTube blockchain platform is based on YouTube and is designed for video content. Like Steemit, DTube uses the STEEM blockchain. Accordingly, users are also paid for their activity in Steem Dollars. There are no advertising clips in front of the videos like on YouTube. One example of DTube’s success is the YouTuber „Furious Pete“. His videos on weightlifting and eating out follow almost five million people on YouTube. Nevertheless, some of his videos appear exclusively on DTube.

LBRY is a platform for films. Artists make their work available directly to the target group. The idea behind LBRY is that artists can market their work without giving an intermediary platform like Netflix or Spotify control over payment. LBRY now has around 600,000 registered users.

Reasons for the success of the Bitcoin secret

Steemit, DTube and LBRY have one thing in common: they offer their users a fair and transparent Bitcoin secret payment model. However, the big competition is increasingly caught in the crossfire of critics, for example because of the distribution of advertising revenues through YouTube. The data scandal surrounding Cambridge Analytica also motivated many users to leave Facebook. Competitors benefit from this.

It is unlikely that the mainstream platforms will refrain from trading their users‘ data. Steemit and DTube, on the other hand, also enable passive users to earn an income. Because not only own content, but also comments can be paid by other users with an „upvote“. Even members who are the first to link to a later popular article (and thus contribute to its popularity) receive a reward. Unlike Facebook and Google, users earn money for their data and activity. Dan Novaes, co-founder and CEO of Current’s streaming service, says:

„So far, I don’t think people have realized how valuable their personal information is. […] With Blockchain, people have the opportunity to get paid for their time, attention and data. Your valuable data is no longer controlled by a few giant corporations.“

Another argument in favor of blockchain-based social media services is that they are not susceptible to censorship. Poor contributions are punished by the community, but cannot be removed from the blockchain. Accordingly, the platform itself has no way of deleting posts. This is a strength in repressive political systems. However, with embarrassing posts after a few glasses of beer, this can also backfire. Therefore, and this is not only true for the blockchain: first think, then write.

Investing in crypto currencies: The ICO Strategy

An ICO is in parts comparable to an initial issue of securities on a stock exchange. The word ICO stands for Initial Coin Offering. An ICO is an opportunity to acquire money for projects in the Blockchain ecosystem via crowdfunding. Those who invest money in this project receive tokens of the planned crypto currency in exchange – which, as soon as the supported project has established itself, can certainly pay off – at least that’s hope.

What is an Bitcoin loophole?

This means that money that comes from an ICO usually goes to the Bitcoin loophole developers. In the best case scenario, it should be used to further develop the crypto currency or to make it ready for the market in the first place. This makes the Bitcoin loophole as attractive as it is dangerous.

Risk analysis: ICO in the time horizon
Let’s look at the ICO from an investment perspective. Of course, there are other reasons to invest in a new crypto currency, but here we only consider the investment case.

First of all, it should be noted that you usually acquire the right to something from the ICO that does not really exist yet. You buy a token, which is usually distributed after the end of the ICO, for example via a protocol like Ethereum. When the ICO is finished, the developer can inform his supporters that the tokens will be transferred soon. So everyone creates an Ethereum Wallet and receives a credit for the purchased coins.

Even if you get the coins well written, you should be aware that it is still only a „number“. A real equivalent does not exist at this time yet. And the coins can rarely be used in the early phase.

Conclusion: First of all, we only receive a few coins that no one may know, that have no equivalent value and that are not even ready for use.

Those who invest in the news spy should therefore have two qualities

1. frustration tolerance like seen here:
Many investments promise the new disruptive revolution in various areas, but not all of them will survive. Often enough, the current hype is compared with that of the news spy Internet at the end of the 90s. Because even then the enthusiasm was huge, the innovativeness high and everyone sensed the imminent wealth. Enthusiasm quickly came to an end when many of the once hyped companies went bankrupt. This can also happen with blockchain start-ups. Remember: You are investing in something unreal, new, unknown. Assume that in the worst case you will suffer a total loss. Calculate your willingness to pay accordingly.

2. patience
As already mentioned, you are investing in something that you cannot use today, tomorrow and possibly this year. Especially because you are an investor in the early phase of a crypto currency, you usually have higher return potential than with established currencies, but the loss potential is also much greater. And the road to wealth can become a dry spell. Invest only the money that you can easily do without. Because you won’t see it again so quickly. The money that flows to the developers is intended for the development of the product. And that can take a long time, so be aware that ICO’s is a long-term strategy and not a quick profit.

But how do you find the right ICO?
This is not easy, because ICO’s are one of the least structured investment vehicles for crypto currencies. You can’t just open a stock exchange on your smartphone that allows you to swap currency pairs back and forth. Instead, you have to find your way around a publisher’s individual website and transfer BTC or often ETH to a foreign company.

Each ICO is a new task and should be thoroughly analyzed. A critical point of view will pay off in the long run: Is the publisher only interested in transferring an existing model to a blockchain technology or does the project offer real added value that can achieve measurable results?

Since it has to be estimated how the project will develop in the future, the team is also decisive: the developers should feel the fire to drive the project forward.

The task is to condense a huge amount of information about the project into a few facts that are relevant for decision-making. This costs a lot of time, but reduces the risk of blindly investing in new projects and running into the knife of the black sheep – who, unfortunately, are increasingly taking the floor.

Bitcoin: Can the crypto currency soon compete with the stock market?

Bitcoin’s volatility is falling steadily. While fluctuations of the Bitcoin exchange rate in the double-digit range were not uncommon a year ago, the crypto currency number one now seems to have levelled off somewhat. In the last 24 hours, the Bitcoin exchange rate has only dropped by 0.64 percent, in the course of the month by just under 3.3 percent – a sign of maturity? There is some evidence that we are dealing with a crypto currency that is slowly gaining maturity.

Bitcoin, originally set out to turn the banking system around, had (and still has) to struggle with some initial difficulties. First, there is the image of the dingy Internet currency, which exists only to facilitate terrorism and money laundering. A picture that is still persistent. In addition, there are constant doubts as to whether it is not a snowball system or the largest bubble the world has ever seen. This, combined with the high price volatility, has also been an argument that, for example, the US Securities and Exchange Commission has prevented Bitcoin ETF from being approved. However, as several researchers at the University of Krakow have now discovered, some things have changed in the country of crypto currencies.

Comparison of Bitcoin and the Bitcoin revolution

The scientists now compared the fluctuations in the Bitcoin exchange rate with those of the Bitcoin revolution and determined:

„[…] the Bitcoin revolution market and possibly other crypto currencies have concrete potential to soon become a regular market – as an alternative to the foreign exchange market. “

They analysed the data for the period from 1 January 2012 to 31 March 2018 by filtering out trading data one minute apart. Among other things, they examined the relationship between trading volume and price fluctuation (volatility). Particularly in view of the last peak phase in December, they found that everything points to the Bitcoin market currently becoming more mature.

Bitcoin loophole: a normal phenomenon

Probably the most remarkable finding of the study: The Bitcoin loophole during the peak phase in December 2017 indicates that the Bitcoin loophole market is maturing.


„On December 16, 2017, the Bitcoin market experienced a spectacular turnaround. It changed from strongly growing to sharply declining […]. Such phenomena are well-known products from mature financial markets and occur unstoppably in [all markets] […]“.

It is above all the bubble phase that suggests that the market has now matured after the brief sharp rise and the bursting of the bubble:

„One of the simplest parameters for the temporal development of the price is [a correlation of two parameters] in the (growing) bubble phase […]. There is some empirical evidence that [this correlation] is common, perhaps universal, in financial markets“.

They ultimately come to the conclusion:

„The Bitcoin market has very quickly developed the statistical characteristics that characterize all „mature“ markets, such as stocks, commodities or foreign exchange trading. It seems obvious that other crypto currencies follow this example. This could lead to a completely new market […]“.

In summary, the Bitcoin market has experienced in a very short time what long matured financial markets took much longer to achieve. And: bubble formation is normal and part of the ripening process. Bitcoin has thus reached a degree of maturity that, according to the researcher, will soon enable it to compete with traditional markets.

The next decision on a Bitcoin ETF is due in November – perhaps the SEC will take this study to heart.

HUSD: The stable coin solution of the Bitcoin stock exchange Huobi

The Bitcoin exchange Huobi is planning its own stable coin solution. Instead of releasing a new token like many others at present, however, the company is working on a solution to connect the existing coins with each other.

Bitcoin trading pair is still to come

Stable coins are a controversial issue in the Bitcoin ecosystem. Although they are theoretically very practical, they promise a one-to-one mapping of fiat currencies such as the US dollar. This allows one to switch directly between crypto and fiat when trading on the Bitcoin exchanges, without having to go through any bank accounts.

In practice, however, doubts repeatedly arise about the supposed stability of stable coins. As the Tether case has recently shown, there are still some problems with implementation. Even in the sheer mass of stable coins, you can sometimes ask yourself the question: Do we really need several stable coins? A stable currency should actually be enough.

Huobi launches new stable coin for stable coins with HUSD

Be that as it may, the Bitcoin exchange Huobi is now throwing its own stable coin onto the market, which in turn is to represent other stable coins: the HUSD. According to the official announcement, Huobi wants to release a stable coin, which represents a total of four stable coins. These are Paxos Standard (PAX), TrueUSD (TUSD), USD Coin (USDC) and Gemini Dollars (GUSD). If you transfer stable coins to your Huobi account in the future, the stable coin balance will be displayed directly in HUSD – a conversion and an exchange into one of the stable coins will be done directly by the exchange’s own token.

As you can see from the blog post, the Stable Coins PAX, TUSD, USDC and GUSD can be deposited on the stock exchange from 16 October. The trading pair USDT/HUSD for Tether will be available on the Bitcoin exchange from 22 October. The BTC/HUSD and ETH/HUSD trading pair will probably have to wait some time. Huobi first wants to evaluate the „market conditions“.