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Exchanges exaggerating volumes by 800%

Naughty, naughty exchanges have been lying about the amount of crypto they actually buy and sell, which will come as a SHOCKING surprise to almost no one.

 

Crypto exchanges are a law unto themselves. Ok, there are a few that are pretty decent now, and toeing the line because they know that the public will only use them if they are well-run and properly regulated. But there are plenty of others that are frankly cesspools.

 

There is lots of shady stuff that comes with this lack of rules. Security practices that a child could wander through. Insider trading. Pump-and-dump schemes. And wash trading. Lots of wash trading.

 

Wash trading simply means that someone – quite possibly sanctioned by the exchange itself – is selling coins backwards and forwards to themselves, making it look like there’s lots of interest and market activity, when in fact there isn’t. Wash trading is illegal in the conventional markets, because it’s associated with pump-and-dumps: scammers accumulate a security, signal interest in it with fake volume, wait for unsuspecting buyers to push the price up, and then sell at the top.

This has always been suspected on crypto exchanges, which frequently post massive volumes but somehow don’t have the actual liquidity to allow regular traders to buy and sell large quantities of coins without horrendous slippage. Now we have some idea of how bad the situation really is. Forbes records:

 

While exchanges like Kraken, Binance, and Coinbase show similarities between viewership and trading volume, others like Coinbene and ZBG have suspiciously high reported volume vs. views.

Some notable outliers were BitMax, Lbank, BW, and ZBG which had extremely high reported volumes, but expected volumes which in some cases were less than 1% of what they reported.

If each exchange averaged the volume per visit of CoinbasePro, Gemini, Poloniex, Binance, and Kraken, we would expect the real trading volume among the largest 100 exchanges to equal $2.1 billion per day. Currently, that number is being reported as $15.9 billion.

 

There are a few legitimate players – exchanges like Binance, Kraken and Coinbase. But there are others who are inflating their figures by a massive one hundred times. And overall, reported volumes are 8 times higher than the reality.

 

Just another day in crypto, then.

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What good is your crypto?

Critics say cryptocurrency is only good for scams and speculation, but this is not true. Here are 10 real-life use cases for different cryptos. Even BCash.

 

Bitcoin. This coin is the daddy. You should own some because the banking system is run by asshats and they are stealthily taking all your money. They cannot take your bitcoins and if you get some now then in 10 years you will be a total baller like Jamie Dimon. Only not an asshat.

 

Ethereum. This coin is very very good for kittehs. You can make infinite kittehs, paying infinite transaction fees. Boom.

 

Litecoin. This one goes up and down. Sometimes Charlie Lee sells it all at the top and it goes down a lot. Later it will go up a lot again. It is like other cryptos in this regard, except it has Charlie Lee to sell it all.

 

Ripple. This is a very corporate and centralised coin. It is good for paying for coke and hookers. Not for you, but the bankers appreciate your donation.

 

Bitcoin Cash. This is a fork of Bitcoin and a useful coin to own if you are confined to your house for weeks on end in a snowstorm. The code and complete blockchain can be printed out and used in a personal hygiene capacity when you run out of paper. Be careful of paper cuts – they’re what Roger would want.

 

Binance Coin. This one only goes up. In a few years it will have consumed the entire global financial system and CZ will be Grand Emperor of the Galaxy. He will have a purple cloak with a badass collar and a laser gun and you will have to kneel before him and kiss his ring.

 

BCash SV. This is a copy of BCash that Craig once rubbed his wang all over. You should probably not touch it but it can still be printed and used as firelighters if handled with rubber gloves.

 

Doge. This coin is such crypto and very blockchain. It is also the first cryptocurrency to be made entirely from cheese. It can be eaten with chunks of pineapple on little sharp sticks that can be reused after the cocktail party as toothpicks.

 

Monero. This is a very secret coin and excellent for darkweb purchases of illegal goods like guns, drugs and lobster-themed pornography. Botnets like to mine it so it is even better if your central heating breaks down in winter because your CPU will go into overdrive, keeping your house nice and toasty warm.

Tether. This is similar to the US dollar but has few of the advantages, like stability. It is backed by some dollars, and some debts, and some other assets like Giancarlo Devasini’s shoes and the contents of Bitfinex’s fridge.

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Tuesday Inferno market update

TL;DR The calm persists…

 

We’ll start by zooming out to the daily chart, because there’s comparatively little new on the shorter-term timeframes. Looking at the daily, we can see that bitcoin has, essentially, drifted sideways for three months now. After the fall to $3,100, the vast majority of the action has taken place within the band between around $3,500 and $4,000.

 

Bitcoin is trading in a range. This is characteristic of a post-capitulation market – just like we saw after capitulation in 2015. However, it’s also possible that this is another consolidation before a final move lower, as we saw in October and November. We recently saw another short-term move above $4,000, but bitcoin was unable to maintain that level. That painted a lower high, once again – not a bullish sign. On the other hand, there’s an absence of highly bearish factors too.

 

Looking at this another way, this could be a fourth wave in an Elliott Wave cycle – a corrective wave up before a final fifth wave lower. Right now, the charts can be read in different ways, and that’s exactly what crypto analysts are doing. There is no clear direction to the market, and the signals are very mixed. For all but the most expert traders, emotion and hope will colour the analyses, which is much what we see on Crypto Twitter. This is a time of potentially huge opportunity, the bottom of the cycle – but it’s time of risk, too, if it turns out we have another fall on the cards.

 

Playing into the bigger picture, Google Trends searches for bitcoin are not showing the increasing volume that typically pre-figures a price rise. In the past, searches have correlated closely with action. Watch for an uptick in action: it’s a useful indicator.

Lastly, the Lightning Network is growing fast, with well over 1,000 BTC now locked in almost 40,000 payment channels. LN adoption will be massively important in the next bull cycle, since it ensures the ability to make micropayments.

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Karpeles goes free – but the story isn’t over

Have we seen an end to the saga, as the former MtGox CEO will not serve time on data manipulation charges?

 

Mark Karpeles, the who presided over the MtGox debacle that saw 850,000 BTC of customers’ money lost, will not serve additional time over embezzlement and data manipulation charges. At the end of last week, Karpeles was found innocent of stealing customer funds. While he was found guilty of trying to hide the losses, he received only a suspended sentence – meaning he will not be going back to prison unless he commits another crime in the next four years.

 

‘I am happy to be judged not guilty for embezzlement and breach of trust,’ Karpeles said in a statement. ‘I will discuss with my lawyers and decide how to proceed on the remaining charge.’

 

The verdict came as a surprise, since the Japanese legal system typically would not allow a case to progress to court unless there was a high chance of conviction. The court implicitly confirms Karpeles’ narrative that hackers stole the money from Gox.

 

Will this prove the end of the Gox saga? Maybe not. Customers still have to be made whole using the remainder of the 200,000 BTC found by Karpeles in an ‘old format’ wallet after the exchange collapsed. Plus there is the Gox Rising movement that seeks to revive the exchange. This group of creditors who lost money on Gox has several aims, including maximising the ‘speed, certainty, and size of creditor recovery’. This is part of a wider initiative by Brock Pierce, a well-known figure in the crypto world, to take control of the defunct exchange and relaunch it. Pierce claims that in March 2014, shortly after MtGox collapsed, he purchased the company from Karpeles. Karpeles has not confirmed this.

 

In short, Karpeles may be out, but the shadow cast by Gox is long, and money does strange things to people. We haven’t yet seen the end of this.

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What are Tether doing now?

The company behind USDT essentially admits to running a fractional reserve, and potentially issuing money backed by broken or failing assets.

 

As we mentioned yesterday in our market update, Tether have been up to their shenanigans again. Very quietly, without trying to draw attention it it, the company have changed some text on their website. Instead of claiming that every USDT is backed 1:1 by dollar reserves – something that was always in doubt because they won’t allow a proper audit – Tether now state:

 

Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”).

 

We have always been skeptical about Tether. It’s been a while since we last posted about them and their shady practices, but what is abundantly clear is that Tether have not been playing above board for years. You can read what we suspect has been going on, and how the company made some serious profits through manipulating the markets and their currency, in this article: Tether could be guilty of perpetrating a huge fraud, just not the one we think.

 

So now, Tether has actually admitted that they may not back their USDT 1:1. ‘From time to time’ Tethers are backed by other assets – including debt. A debt owed to Tether is an asset, from their perspective, and so if they are owed $1 million by another company or individual, they can mint 1 million USDT against that asset.

 

Now, it doesn’t take much to see how this could be abused.

 

Remember that little episode that happened ten years ago? It was called the ‘Global Financial Crisis’. Basically, banks issued enormous loans but didn’t know how risky they were. Then they parcelled them together and mixed them up and sold them around in circles to each other, until no one really knew who was holding the bad loans, assuming they even knew the loans were bad in the first place.

 

So let’s say that one of the loans against which Tether issues USDT never gets repaid. What happens then? Is it:

  1. Tether publicly updates the community and makes up the difference from its reserves
  2. Tether comes clean and allows USDT to trade at a discount that reflects the problem until they can cover the bad debt
  3. Tether says nothing to anyone and lets the party continue.

 

Right. Because this is not a company that is famous for its transparency.

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Friday Inferno market update

TL;DR two steps forward, two steps back, brings you closer to the edge of the precipice.

 

Bitcoin has now drifted sideways for three weeks, on low volume – for what it’s worth, we don’t believe some of the inflated exchange figures we see on CoinMarketCap. Looking at the Bitstamp daily chart, we see volumes are gently dropping. RSI is neutral and has been all month.

 

That’s not to say things are entirely quiet, though. In these conditions, as we know, the liquidation hunters are busy. They wait for shorts or longs to stack up, and then bump the market in the other direction to liquidate them, pushing the price further in that direction as the orders are margin called and forced to cover. Yesterday, we saw one of these clear the order books for $50-60 in both directions, first up and then down, before the price returned to where it started.

 

Overall, though, the market is flat and quiet, with just these signs that whales are moving under the surface. But it won’t stay that way for long. Sentiment appears to be turning. After Crypto Twitter declared the bottom was in, more and more analysts are starting to think they spoke too soon. @MoonOverlord, a popular commentator, has drawn attention to the parallel between the calm before the November crash from $6,000 and the current quiet on the markets. If he’s right, bitcoin will break down by the end of the month, heading towards the targets set by the likes of Murad Mahmudov ($1,800).

 

Feeding into the wider picture, once again Tether (USDT) is cause for concern. After everything went quiet for a few months, Tether is now back in the news thanks to a recent update to their site. This makes it look like USDT is no longer backed by dollars alone (assuming it ever was):

Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”).

 

But it’s not all bad, not by any means. The US Securities and Exchanges Commission (SEC) has confirmed its earlier opinion that Ethereum (ETH) and cryptocurrencies like it do not count as securities under U.S. law.

 

Lastly, Mark Karpeles is facing his verdict on embezzlement and data tampering charges tomorrow. Depending on which way it goes (and it doesn’t look great for Karpeles), it could help draw a line under the MtGox scandal.

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Karpeles facing up to 10 years in Japanese jail

A verdict is due tomorrow for charges of manipulating computer data and embezzling $3 million of customer money.

 

Former MtGox CEO Mark Karpeles is facing a lengthy prison sentence when a Tokyo court hands down its verdict tomorrow. Karpeles is accused of misappropriating millions of dollars of client money, while faking data to hide the thefts. He is alleged to have spent the money on luxury goods and items unrelated to the operation of the exchange, according to the Japan Times.

 

Gox has become a byword for shadiness, theft and incompetence in the crypto world as a result of the collapse of the exchange in 2014, with the loss of 650,000 customer bitcoins. To be ‘Goxxed’ means to be robbed or defrauded of bitcoins by an exchange, through hacking, insider theft or loss due to negligent security practices.

 

Karpeles has talked about his experiences in Japanese prison on social media in the time since his release. As he summarised in one post, ‘Poor service, bad food. Would not recommend.’ He also discussed being forced to sit upright and motionless in a hard chair for many hours on end, and others with knowledge of the Japanese prison system talk about forced marches and harsh, structured regimes.

 

Known for being overweight and informally dressed in his days as CEO, Karpeles emerged from prison not only far wealthier – thanks to bitcoin’s rise in price in the time he was inside – but a lot slimmer and healthier-looking too (prompting one bitcointalk user to comment, ‘my wife needs to go to jail in Japan’).

 

Karpeles has sworn that he is innocent, blaming hackers for the theft. However, the bar for innocence is high in Japan, and the case would not have progressed this far if there was not the likelihood of conviction. If he loses his case and is sentenced, he can still appeal, which will keep him out on bail.

 

And so the Gox saga rumbles on, five years after the collapse of the world’s largest bitcoin exchange catalysed the 2014 bear market. Surely, an end must be in sight?

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CRYPTO: will this be the worst film ever made?

Maybe not, but it could be surprisingly bad. We’ll take it anyway.

 

There’s a new film out, due in cinemas on 12 April. It’s titled CRYPTO and it stars Kurt Russell, plus a few others for whom he made space on his bandwagon. Here’s the trailer.

 

It’s an action-crime-drama-thriller kind of a film. And from the trailer, it doesn’t exactly look promising.

 

Now, you have to bear in mind a few things. This film is only just coming out now, meaning it’s been a while in the making. It started shooting back in June 2018, and we can assume the script was started at least a few months before that. Like, at the top of the 2017 bubble. But in no way is this film an attempt to cash in on the crypto craze, right?

 

Secondly, it’s about money laundering. This also dates it somewhat. Bitcoin is used for money laundering, sure. But the times change, a lot. Bitcoin has become popular for terrorist financing, darkweb drug purchases and ransomware payments, as well as making tentative inroads into organised criminal activity through integration in the conventional banking sector. The film does not appear to reflect the multitude of uses to which crypto can be put nowadays. Oh, did we mention the Russian mafia feature? Naturally.

 

And, of course, this is the first meaningful exposure that many ordinary folk will have with crypto – and the first exposure that a bunch more will have had since they lost a stack of cash a year ago.

 

So it’s not exactly a great calling card for crypto. On the other hand, it’s going to introduce bitcoin to a bunch of impressionable young people who have money to burn on bad movies, and who will buy shiny glamorous things they don’t understand. And it broadly coincides with the bottom of the bear market. Hmm….

 

CRYPTO isn’t going to be the worst film ever made – we have to bear in mind oeuvres like Home Alone 3, remember – but it’s almost certainly going to be really bad.

 

But hey, we’ll take it. There’s no such thing as bad publicity, right?

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Tuesday Inferno market update

TL;DR Two legs down, one leg up, reverse, rinse, repeat. The market is on a knife-edge.

 

The picture today is not so very different from the way things have looked over the last few weeks. In summary, we’re seeing periods of stagnation and price drifting along, slightly upwards, slightly downwards, but punctuated with sudden large moves both up and down. These are likely due to liquidation hunting bots or whales, which wait for longs or shorts to pile up, and then push the market in the other direction to liquidate them.

 

Bitcoin is trading above the 50 and 100-day moving averages, but still well below the 200-day MA ($4,900). There’s a resistance zone around $3,900, and the RSI is pretty neutral. We haven’t seen that push we need towards $4,200 to restore the (temporary) uptrend. Volumes are a lot higher than they have been, according to CoinMarketCap, but a lot of that is looking suspicious, with several ‘large’ exchanges likely faking volumes.

 

So bitcoin is stuck in a range, and there is still little indication of whether the next major move will be up or down. Given the state of things, we suspect that the move, when it comes, will be impressive either way. Zooming right out to the 3-day or weekly, things don’t look great; price is drifting sideways or slightly upwards, on broadly decreasing volume. It’s hard to call it a bear wedge, but it’s hardly bullish. But bitcoin constantly surprises its traders.

 

In other news, today is the 30th birthday of the World Wide Web! Congratulations Tim Berners-Lee – who is less than impressed with the state of his creation, which he says is in a ‘downward plunge to a dysfunctional future’.

 

In better news, the largest blockchain ETF starts trading on London Stock Exchange. It’s not a bitcoin ETF, and won’t directly invest in crypto – it is composed of 48 companies active in the blockchain sector.

And lastly, security website cryptosec.info has published information that proves Craig Wright is the real Satoshi Nakamoto.

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OneCoin leader gets pinched

One of the largest scumballs in the industry gets to spend some quality time behind bars.

 

Back in 2014 a new ‘cryptocurrency’ was founded and within a year or two, it was making the big time. It was the Bitcoin killer, its representatives claimed. There were a lot of red flags around OneCoin, and most of the crypto world was certain it was a Ponzi scheme – with early investors being paid ‘returns’ from new entrants. But that didn’t stop people throwing money at it. Its team shilled it aggressively to ordinary investors, who bought in to the tune of over $4 billion as they saw the price rise.

 

Of course, it couldn’t last. Investors were promised a stake in a mining operation run by the company, and 500-1,000% returns with little risk. But none of it existed, not even a token effort at a blockchain. Tokens didn’t trade on the open market – there were no tokens. The price was set solely by the company. As a statement from the FBI clarified: ‘Unlike authentic cryptocurrencies, which maintain records of their investors’ transaction history, OneCoin had no real value. It offered investors no method of tracing their money, and it could not be used to purchase anything. In fact, the only ones who stood to benefit from its existence were its founders and co-conspirators.’

 

Now, law enforcement has caught up with OneCoin. The leader of the scheme was recently arrested in the US. Ruja Ignatova founded OneCoin in Bulgaria in 2014, but stepped back and disappeared from sight in 2017, when the heat had started building. By then, her brother Konstantin Ignatov was the head figure of movement. He was picked up at LA International Airport on charges of wire fraud, which can carry a sentence of 20 years.

 

OneCoin was a particularly nasty scam, preying on gullible investors who saw the hype behind crypto and wanted to make money out of it without really understanding anything. It was based on trust in OneCoin and its representatives, which is ultimately what proved to be its downfall – there was nothing tangible behind the empty promises.

 

While investors won’t get much, if any of their money back, it’s good to know that some of the industry’s worst scammers are getting their comeuppance.

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