Ultimate Source For Bitcoin Price Manipulation By Wall Street

“I Would Be Shocked If Bitcoin Prices Weren’t Manipulated.” Ultimate Source For Bitcoin Price Manipulation By Wall Street

According to Peter Tchir, there is an ongoing manipulation of bitcoin price. What the macro and fixed income expert isn’t sure of is whether such price manipulations are against the law. The DOJ recently began investigating suspected trading malpractices in the cryptocurrency market.

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Whales And Miners Influence Bitcoin Prices

Writing in an op-ed for Forbes, macroeconomist Pter Tchir states that he’d be surprised if there weren’t any shenanigans going on with the way Bitcoin prices move, saying:

Whether the activities meet the legal definition of manipulation or can lead to a criminal indictment remains to be seen, but I’d be shocked if there wasn’t manipulation of prices occurring.  Never forget Rule number two of the Three Rules of Bitcoin – ‘There are no rules!’

According to Tchir, whales and miners have vested interests in higher Bitcoin prices. For miners, it makes sense for them to want to push prices higher from an economic perspective. Otherwise, mining no longer becomes a profitable enterprise.

Tchir drew comparisons with the mainstream market arguing that wealth concentration gives whales “the incentive to push prices higher.”

There is, however, a significant aspect missing from Tchir’s analysis as it ignores the incentives for price declines. Whales can take advantage of these selloffs by shorting bitcoin and strengthen their monopoly of the market. They can acquire more bitcoins at lower prices before driving prices higher again.

On May 24, reports emerged that the DOJ and the CFTC were looking to probe suspected bitcoin price manipulation. According to inside sources, spoofing and wash trading are the focus of the investigation. The DOJ believes traders are engaging in illicit trading activities to move crypto prices in their desired direction.

Continuous Crypto Price Decline

Tchir is correct in pointing out that the lack of regulations in the market make it possible for such alleged manipulations to occur. Bitcoin is currently experiencing a week-long decline that seen the number one crypto bouncing of support at $7,000 USD.

According to Tchir, the crypto market is losing steam due to an amalgam of problems that have slowed down adoption rate. He also pointed out that the failure of the market to rally after Consensus has taken some of the bullish hype away from the industry.

Thus, as investigations probe suspected price manipulation, Tchir believes that crypto investor confidence is at an all-time low.

Updated: 5-24-2018

Was Bitcoin’s Price Manipulated? US DoJ Asks

In its latest attempts to crack down on cryptocurrency market anomalies, the Department of Justice (DoJ) has initiated a criminal investigation into the possible manipulation of the prices of the popular cryptocurrencies like bitcoin, according to Bloomberg.

DoJ-CFTC Jointly Probing Price Rigging

For the investigation, the Department of Justice is reportedly working with the Commodity Futures Trading Commission (CFTC) that administers cryptocurrency futures trading. Though CFTC only regulates the derivatives market including those linked to cryptocurrencies, it can take action if there are irregularities observed in spot markets.

According to people familiar with the matter, the probe is focused on certain malpractices like spoofing and wash trading. Spoofing involves sending fake orders in bulk to create fictitious demand and supply which can lead the other participant into buying or selling at extreme prices, and then the fictitious orders are canceled once the desired price levels are hit.

Wash trading involves a dicey trader acting on both buy and sell side to execute trades at his desired price, leading to other traders to believe that the those rigged price levels are correct.

Regulators also have other hurdles to take. Some of a cryptocurrency’s features that aid the possibility of price manipulation include the unregulated nature of such virtual currencies and their marketplaces, their 24/7 non-stop trading, and trading on multiple exchanges spread across the globe and remain outside of the purview of a single regulator.

Between February 2017 and December 2017, bitcoin prices jumped from the levels of $1,000 to almost $20,000, which led to investors jumping on the cryptocurrency bandwagon. The high valuations also led to a big flood of new initial coin offerings (ICO) to hit the market, and lured people into buying things that they don’t really understand.

Controlling such mass hysteria and developments of the virtual world remains a challenge for the authorities, as they attempt to do their best to safeguard the common man from losing their hard-earned money. The investigation is a major step in the direction. (See also, How to Identify Cryptocurrency and ICO Scams.)

Apart from the regulators, the industry is also taking necessary steps to maintain the sanctity of the new-age virtual currency markets. The Winklevoss twins, Cameron and Tyler, who run the Gemini Exchange platform, have hired Nasdaq to perform the necessary scrutiny of the virtual currency trading on their exchange. (See also, All about Gemini, the Winklevoss Bitcoin Exchange.)

Despite all the regulatory measures imposed on crypto trading by several countries across the globe, the high volatility in their valuations continues. A few nations, like China which accounts for a significant chunk of cryptocurrency activities, have banned cryptocurrency exchanges completely.

Bitcoin extended its declines on the news of the probe, and was trading at $7,402 down more than 6 percent over the past 24-hour period at the time of writing. It is now down by more than 20 percent since its monthly peak on May 6.

Updated: 6-11-2019

Crypto Market Manipulation: How It Works And How To Protect Yourself

Do you sometimes feel that the digital currency markets are manipulated? Do you find some of the Bart Simpson pattern-generating price-swings odd?

A simple Google search will reveal that you are not alone with your suspicions. Scores of “experts” and YouTube talking heads agree that price manipulation is rampant, and yes, that goes for the blue-chip entity, bitcoin too.

Most of the currently occurring manipulation is a direct result of the immature and unregulated nature of these markets. The good news is that there are some measures you can take to insulate yourself from the effects of market manipulation.

You can even completely cut its risks. 

So, What Is Market Manipulation?

Market manipulation occurs when a given entity deliberately and artificially induces a swing in the price of an asset. The primary goal of market manipulation is financial gain at the expense of other market participants. As such, it hurts bitcoin investment and hinders mass adoption.

The practice is illegal and immoral. It also constitutes interference with the fair and free operation of the market.

The unregulated digital currency realm is fertile ground for every type of asset price manipulation.

Some Of The Most Common Such Practices Are:

• The ever-popular Pump and Dump
• Wash Trading
• Long/Short Liquidation Hunting
• Whale Moves
• Dark Pool Trading
• Shilling
• Spoofing

Pump And Dump – The Oldest Trick In The Book

It is common to pump a digital asset by buying massive quantities of it and then dumping it at the high-point of the resulting price-spike. Anyone with the means to buy up significant quantities of coins can do it.

Some perpetrators will use the basic pump and dump in combination with tactics such as shilling, spoofing, and wash trading.

Sometimes, pump-and-dumpers pool their resources in P&D groups for better efficiency. Despite the apparent simplicity of the technique, it is not easy to make money with it. It lends itself best to well-coordinated entities such as exchanges.

Even most P&D “foot soldiers” end up losing money, as only the top brass knows the exact timing of the dump.

Exchanges Use Wash Trading To Generate Volume

Wash trading refers to the simultaneous buying and selling of coins, for essentially the same price, by the same entity. Since no direct profits or losses result from this “water-treading” activity, why is it done?

The Short Answer Is: volume. Wash trading makes it look like large quantities of an asset change hands over a short time. That, in turn, can mean increased investor interest, which can lead to a price spike.

Being able to show proper trading volumes is important for exchanges prestige-wise too.

Long/Short Liquidation Hunting Is The New Way For Exchanges To Make Money

Following the 2018 crash of the bitcoin and altcoin markets, the notorious volatility of the vertical has lost some of its bite for now. The spot markets no longer offer the sort of gains on bitcoin investment they did during 2017.

Bitcoin investors thirsting for action have thus turned to leveraged trading and high margin bets. Their spot trading fee-based revenues dropping, exchanges have started compensating. Some have increased their trading fees. Others have begun manipulating asset prices. Their goal is to trigger the liquidation of their clients’ leveraged long and short positions.

It may not be the cleanest way to make money, but sadly, it works.

Bitcoin Whales Are On A Completely Different Level

Some 4.11 percent of bitcoin addresses own over 96 percent of all BTC in existence. When a true whale begins to throw its weight around, price ripples, or rather, tsunamis follow.

Pumping and dumping bitcoin is a walk in the park for such a whale.

Dark Pool Trading Gives Rise To New Whales

How does one with the proper financial means become a bitcoin whale these days? Wouldn’t the sudden acquisition of massive quantities of BTC send the price to the moon?

The answer is dark pool trading. Dark pools are private trading forums. Digital assets change hands in vast quantities at a set price on these forums. Given that the whole setup flies under the radar, it does not result in any “official” volume. Nor does it move the “official” price needle.

The Golden Era Of Crypto Shilling Is Still In Full Swing

YouTube is rife with talking heads pushing one altcoin or another. Some projects have massive armies of “fans”. These fans constantly talk up the virtues of these altcoins and attack their competitors.

The oft-declared goal of such shills is to pump the price of their chosen digital asset through sheer hype.

Spoofing May Be A Crude Approach To Manipulation, But It Certainly Works

Manipulators who spoof the markets launch a massive number of buy or sell orders. The “technique” will often result in fake buy/sell walls. These orders are then canceled before execution.

Spoofing is akin to a faked pump and dump. It never really pumps or dumps anything, but it tricks the market into believing that it does.

Manipulation Comes From Unaffiliated Groups As Well The Exchanges Themselves

In fact, it is safe to assume that those who can manipulate the market may try at one point or another to do so. It truly is a free-for-all out there.

Unaffiliated manipulating entities may be whales, as well as the mentioned P&D groups.

Exchanges are without a doubt in the best position to manipulate prices. They are also extremely incentivized to do just that. The discussed market manipulation techniques are easy to execute for exchanges.

Let us not forget about trading bots either. Once again, exchanges are in the best position to take advantage of this potent manipulation tool.

What Can You Do To Avoid Losing Out To Manipulation?

The good news is that if you are a long-term bitcoin investor and holder, these short-term shenanigans will likely not affect you in any way. If your adrenaline receptors are only tickled by thoughts of bitcoin’s price in 2025, market manipulation is of no concern to you.

However, if you are a bitcoin trader, you are fully exposed to the possibility of market manipulation.

Reading into the fundamentals and generally doing your homework makes perfect sense and can go a long way toward protecting you from market manipulation. There’s something you can do above that, though.

Keep your eyes on the long and short positions and their ratio at your exchange. Fully expect a price dump or pump if that ratio begins to tip one way or the other. If longs become dominant, look for a dump. If shorts grow too high, a pump may be underway.

Updated: 12-19-2019

Are Crypto Derivatives Killing The Price Of Bitcoin?

Let’s go back a couple of years and remember what it was like when Bitcoin was surging to new highs and people were selling their houses and taking out loans to buy Bitcoins. Obviously, in hindsight it’s easy to say it was a bad decision but I am more interested in the future and what is going on with the digital gold now.

The only way to get a piece of the action was to buy Bitcoin itself back then. Now due to financial innovation, we have fractional investments, futures, options, CFD’s and even perpetual contracts. What impact did this have on Bitcoin?

When you trade derivatives, it doesn’t move the actual price. So regardless of how many futures contracts or spread betting positions you have, it will not change the price of the underlying asset.

Definitions

Bitcoin Futures  – These are contracts to purchase at a future value. If you buy a 1-month futures contract you are betting that the price will be higher in 1 months time. This is a margin traded instrument and unless you redeem your contract at the end of the month you will not own any real Bitcoin. The futures price is actually governed by supply and demand but it still will not directly affect the physical Bitcoin price.

Bitcoin Options  – Again this is the option to buy or sell at a point in the future. With a 1 month Bitcoin options contract you can buy a put (bearish) for a call (bullish) position. If you buy a call you pay a premium to be able to purchase the Bitcoin at the expiry point (in this case 1 month). If you buy a call and the price falls you pay the premium to earn the difference between the price at the time and the price if it falls to the level you want in the month.  When the trader is bearish on Bitcoin, he/she can purchase put options to profit from a slide in asset price. The price of the asset must move significantly below the strike price of the put options before the option expiration date for this strategy to be profitable. Now you can get to own the Bitcoin if you take physical delivery of the asset at the end of the contract term but traders rarely do this.

Contract For Difference (CFD)  – This is another margin related product where you do not need to own the underlying asset. In this case, a broker will ask you to have a certain percentage of the value of the asset and you can buy or sell to profit or go long or short. Again when trading CFD’s you do not affect the underlying price. Sometimes the broker will actually own the asset for you if you go long or short.

Spread Bet  – With this asset, you do not actually own the asset at all. You simply just made a bet with the broker about the direction you think the asset will go. It’s as simple as buying when you think the price will rise and selling if you think the price will fall.

Perpetual Or Swap Contracts  – This is very similar to a futures contract. This is an agreement between counter-parties to buy or sell an asset at an explicit price but with no expiry or settlement. The buyer is obligated to buy the underlying asset a specific price once the contract expires, and the seller is required to furnish the asset at the time of expiry. This is all margin-based to so it can be very volatile.

What Does This All Mean For Bitcoin?

Back in the day when you wanted to buy or sell Bitcoin you had to do it physically via your exchange. Now there are all these options and as you can see from the information above not many of them actually affect the underlying price. I have done some analysis on the exchanges that offer the services and they have taken away a lot of volume from the old physical exchanges.

So if you are bullish on Bitcoin now you have soo many options other than just buying it physically like before. Is this changing the dynamic of the market?. Of course, it is, part of the reason for the euphoric rise was the flood of volume. Bid  upon bid pushing the price higher. Now some of those large funds and deep pockets are moving into more regulated spaces like ICE’s Bakkt futures and options or CME’s Bitcoin futures.

All in all, the market is now more sophisticated and that means more stable and less volatile. The days of the price pump may be over as lots of volume has moved into crypto derivatives.

Updated: 12-24-2020

The Price Of Bitcoin Is ‘Driven By Manipulation’: Nouriel Roubini

Updated: 1-17-2021

Bitcoin Price Manipulation: Who Is Guilty?

Of all of the questions, we here at CryptoDetail receive on a daily basis the notion of Bitcoin price manipulation is one that we receive far too often.

Updated: 5-10-2021

Wall Street Uses Old Tricks (High-Frequency, Price Arbitrage, Futures Trading, Options Writing, ) In $2.4 Trillion Crypto Jungle

Wall Street traders like Trey Griggs are finding a new lease on life in the $2.4 trillion crypto Wild West.

After two decades in energy trading, the 51-year-old was lured by a former Goldman Sachs Group Inc. colleague this February into a new world of market-making in digital currencies.

Now he’s in fighting spirits — unleashing old-school finance tricks to exploit the industry’s rampant inefficiencies, volatility and downright weirdness.

“All the fun that used to be had 30 years ago in the commodity markets and is no longer fun — that fun is now in crypto,” says the U.S. chief executive officer at GSR Markets in Houston.

Griggs is among crypto newcomers deploying systematic strategies that are tried-and-tested in conventional asset classes — price arbitrage, futures trading, options writing — in a booming new corner of finance. As more mainstream investors get behind Bitcoin, boutique firms are joining the likes of Mike Novogratz in an ever-broadening crypto rally that keeps breaking records.

For those who can stomach the price swings, the threat of exchange hacks and the byzantine market structure, complex fast-money trades are offering an alternative way to ride the digital mania.

At GSR, the firm’s bread and butter is market-making, where traders pocket the spread between buy and sell orders.

In stocks, that’s a nearly oligarchic business where the likes of Citadel Securities and Virtu Financial operate at lightning speed.

In virtual currencies, where hundreds of exchanges offer free access at a slower pace, GSR can capitalize on the big volumes without splurging millions on high-frequency infrastructure.

“Part of the tech we have is just to tell us did we actually trade or not, is this trade good or bad,” says GSR co-founder and former Goldman trader Richard Rosenblum. “We don’t want to be slower than our competitors, but it’s just not quite as much of the driver.”

For every strategy in stocks, bonds or currencies rendered boring by low rates, regulation or market crowding, there’s a lucrative trade in a token lying across the hundreds of exchanges out there. Or so the thinking goes.

While crypto die-hards have made merry like this for years, the relentless rallies across the tokensphere this year are drawing more Wall Street converts seeking riches and new thrills.

Take Mark Treinkman. After a career mostly at proprietary stock-trading shops like Chimera Securities, digital money is renewing his passion for quant trading.

“I’ve been going through some of my old strategies and things that wouldn’t have worked in equities in decades have an edge in crypto still,” he says.

A market-neutral strategy run by his $60 million firm BKCoin Capital gained 71% last year using investing styles that often include arbitraging different prices across exchanges and the gap between the spot and futures market.

For a few minutes during trading on Wednesday, for example, the price of Ethereum Classic jumped well above $100 on the Coinbase exchange. The digital token was trading at less than $80 at other venues, offering an obvious opportunity for investors to make money simply by buying in one place and selling in another.

It’s one of the best-known — albeit diminishing — discrepancies exploited by the likes of Alameda Research, a crypto trading firm filled with former traders from high-frequency shops. A famous example is the kimchi premium, the tendency for Bitcoin to trade higher in South Korea thanks to strong demand and the difficulty of moving money around to profit from the gap.

With no one-stop prime broker to centralize trading books and offer clients leverage across venues, traders like Treinkman face plenty of challenges in their bid to arbitrage price gaps, but say the rewards are commensurate.

And the opportunities pop up everywhere. For instance, when longer-dated futures in pretty much any asset class trade higher than the spot price — known as contango — the former almost always converges to the latter as the contracts mature.

That’s popularized the crypto basis trade, where an investor goes long the spot rate and shorts the futures.

When Bitcoin last peaked in mid-April, the December contracts were nearly 4% higher than August which were in turn about 2% higher than the spot reference rate, as speculators unleashed bets on rising prices. By contrast, the December oil contracts were trading beneath August’s on the same day, according to the data compiled by Bloomberg.

“The crypto market is still dominated by retail investors who use excessive leverage and bid the premiums for futures,” said Nikita Fadeev, a fund manager at $60 million crypto unit at quant firm Fasanara Capital.

Trades common in the industry also include short-term momentum and a form of statistical arbitrage, which bets on gaps between various tokens eventually closing like when Ethereum is surging but Bitcoin isn’t, Fadeev says.

As assets grew, the fund recently appointed Laurent Marquis, the former co-head of derivatives at Citadel Securities, as chief risk officer, and Steve Mobbs, co-founder of quant fund Oxford Asset Management, as senior adviser.

Over in Zug, Switzerland, St. Gotthard Fund Management has transformed from an old-school family office writing options on Swiss shares to a digital evangelist in its income strategy aiming to yield 8% a year. Just like in stocks, the investing style sells derivatives to take advantage of big demand to hedge price swings — which causes the volatility priced into options to be higher than what’s likely to come to pass.

For option writers like St. Gotthard, that means the premiums are much juicier, though they also come with a higher risk of having to actually pay out, like an insurer during an earthquake.

“The major difference at the end of the day is how much premium retail investors are willing to pay,” says chief investment officer Daniel Egger. “On the other hand of course we’ve written calls we wished we hadn’t in those moves up.”

In fact, going long crypto over the past year has proved the easiest and most profitable way to tap into the boom. And for those choosing the systematic route, competition is rising.

For example, in order to get an edge in its market-making strategy, BKCoin has recently installed servers at Asian crypto exchanges, a move known as co-location in the high-frequency world of stocks. It’s a sign the industry is growing up fast.

“In any emerging market we’ve seen these inefficiencies decrease over time,” said George Zarya, founder of Bequant, a crypto prime brokerage that caters to systematic traders. “There are more professional players that come in.”

Updated: 7-15-2021

Lark Davis Exposes The Biggest Bitcoin Price Manipulators In The World

• According to Lark Davis, the big investors intentionally pull the price through bearish predictions, buy cheaply then sell high in a cycle that does not favour the smaller investors.
• Davis cautions investors to watch the actions of these big institutions, and not their words or predictions. 

Lark Davis, a popular YouTuber and crypto influencer has revealed that the biggest and most experienced financial players and investors in the industry are manipulating the Bitcoin price.

In a video dubbed “Bitcoin price manipulation rampant”, he stated that the big investors intentionally pull the price through bearish predictions, buy cheaply then sell high in a cycle that does not favour the smaller investors. The major manipulators according to Davis are BlackRock, Guggenheim, JPMorgan, and Goldman Sachs.

BlackRock Claims No One Wants Bitcoin

Recently, BlackRock CEO Larry Fink claimed that institutional investors are not interested in crypto. According to Davis, Fink has a different motive for making that statement as his words do not match the action of his company.

About six months ago, BlackRock claimed Bitcoin was going to hit a $10 trillion market cap. The company further predicted that Bitcoin could replace gold. Furthermore, a couple of days ago, the company bought 12 percent of all MicroStrategy shares.

MicroStrategy has roughly 100,000 Bitcoins, so basically, BlackRock bought 12,000 Bitcoins from them. According to Davis, they want to scare people to sell their Bitcoins while they buy them cheaply.

You do not buy a stake in MicroStrategy unless you want exposure to Bitcoin…Don’t look at their words, look at their actions.

Fink’s statement further contradicts the reality on the ground as Fidelity Digital Asset proved otherwise by announcing plans to increase staff by 70 percent due to the high Bitcoin demand from institutions.

Guggenheim Claims Bitcoin Is Going To 10K

Guggenheim’s Scott Minerd recently predicted that Bitcoin will go down to $10,000 days after his $15,000 prediction. However, Davis claims that like Fink, he wants to play with the emotions of investors. Guggenheim interestingly predicted in February that Bitcoin will go as high as $600,000, which is basically in agreement with BlackRock’s prediction that the market cap would match that of gold.

They are overly bullish at the top, and overly bearish at the bottom.

Just like BlackRock, Guggenheim is literally scaring investors to sell their Bitcoins while they silently buy the dip.

Goldman Sachs Claimed Bitcoin Is Not Viable As A Currency

For some time now, Goldman Sachs has been saying Bitcoin is not a viable currency or investment. Yet, their internal memo disclosed that they are unveiling a new crypto trading team. Another report also claims that Goldman Sachs is ramping up Bitcoin trading in a new partnership with Mike Novogratz’s Galaxy Digital.

This is like somebody saying ‘I love you, I love you, I love you, but beats you all the time.

JPMorgan Claims Bitcoin Will Fall To $25,000

JPMorgan recently predicted that Bitcoin will drop to $25,000. Davis admitted that this is the closest prediction to reality, however, they just want people to dump their assets. The same institution predicted this year that Bitcoin will hit $146,000 when it was bullish. The firm also endorsed clients’ 1 percent allocation to Bitcoin as a hedge. According to Davis, all the biggest manipulators in the world are bearish on Bitcoin.

These guys are the biggest financial criminals in the world.

Updated: 10-4-2021

Crypto Complex Recalls 1920S Stock Market With ‘Rampant Speculation, Manipulation And Theft,’ Says Left-Leaning Think Tank

Cryptocurrency regulation is becoming a partisan issue.

The Center for American Progress, a left-leaning think tank, released a report Monday calling on the Securities and Exchange Commission to aggressively assert its authority over large swaths of the market for digital assets, in the latest signal that the U.S. center-left is becoming increasingly impatient with crypto firms that refuse to submit to the SEC’s authority.

Updated: 10-22-2021