Showing posts with label blockchain. Show all posts
Showing posts with label blockchain. Show all posts

Thursday, May 24, 2018

U.S. Launches Criminal Probe into Bitcoin Price Manipulation

The Justice Department has opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies, dramatically ratcheting up U.S. scrutiny of red-hot markets that critics say are rife with misconduct, according to four people familiar with the matter.
The investigation is focused on illegal practices that can influence prices -- such as spoofing, or flooding the market with fake orders to trick other traders into buying or selling, said the people, who asked not to be identified because the review is private. Federal prosecutors are working with the Commodity Futures Trading Commission, a financial regulator that oversees derivatives tied to Bitcoin, the people said.
Authorities worry that virtual currencies are susceptible to fraud for multiple reasons: skepticism that all exchanges are actively pursuing cheaters, wild price swings that could make it easy to push valuations around and a lack of regulations like the ones that govern stocks and other assets.
Bitcoin extended its Thursday declines after Bloomberg News reported the investigation, and was down 3 percent to $7,409 as of 9:32 a.m. London time. It’s down more than 20 percent since a May 4 peak.
Such concerns have prompted China to ban cryptocurrency exchanges and nations including Japan and the Philippines to regulate them, contributing to a slump that has sent Bitcoin below $8,000 this year. Still, digital coins continue to be a global investment craze, drawing legions of loyalists to industry conferences, generating celebrity endorsements and increasingly attracting the attention of Wall Street.

Traders Colluding?

The illicit tactics that the Justice Department is looking into include spoofing and wash trading -- forms of cheating that regulators have spent years trying to root out of futures and equities markets, the people said. In spoofing, a trader submits a spate of orders and then cancels them once prices move in a desired direction. Wash trades involve a cheater trading with herself to give a false impression of market demand that lures other to dive in too. Coins prosecutors are examining include Bitcoin and Ether, the people said.
A Justice Department spokesman declined to comment and CFTC officials didn’t respond to requests for comment.
The investigation, which the people said is in its early stages, is the U.S.’s latest effort to crack down on an industry that was initially embraced by those who were distrustful of banks and government control over monetary policy.
But Bitcoin’s meteoric rise -- it surged to almost $20,000 in 2017 after starting the year below $1,000 -- has been a lure for mom-and-pop investors. That’s prompted regulators to grow concerned that people are jumping into cryptocurrencies without knowing the risks. For instance, the Securities and Exchange Commission has opened dozens of investigations into initial coin offerings, in which companies sell digital tokens that can be redeemed for goods and services, due to suspicions that many are scams.
Cryptocurrency trading is fragmented on dozens of platforms across the globe, and many aren’t registered with the CFTC or SEC. As a derivatives watchdog, the CFTC doesn’t regulate what’s known as the spot market for digital tokens -- which is the trading of actual coins rather than futures linked to them. But if the agency finds fraud in spot markets, it does have authority to impose sanctions.

Fraud Target

The limited oversight of crypto trading makes it a target for crooks, said John Griffin, a University of Texas finance professor who has studied manipulation, including in digital-coin markets.
“There’s very little monitoring of manipulative trading, spoofing and wash trading,” Griffin said. “It would be easy to spoof this market.”
Signs are emerging that some crypto exchanges realize the industry’s growth could be constrained if large swaths of investors conclude that trading platforms have a “buyer beware” approach to oversight.
Cameron and Tyler Winklevoss
Photographer: David Paul Morris
The Winklevoss twins, who are known for getting rich off Facebook Inc., hired Nasdaq Inc. last month to conduct surveillance of digital coins trading on their exchange, Gemini Trust Co. Cameron and Tyler Winklevoss have also urged trading platforms to band together to form a group that would serve as a self regulator for the industry.
Some market participants have alleged that crypto manipulation is rampant. Last year, a blogger flagged the actions of “Spoofy,” a nickname for a trader or group of traders that have allegedly placed $1 million orders without executing them.


Sunday, October 15, 2017

The New Bit Currency Crypto FX paradigm

(GLOBALINTELHUB.COM) — 10/15/2017 Dover, DE — The Bit Paradigm has arrived; with billions being thrown into projects that no one knows who are the founders, or if the profiles they use for their ‘team’ pages are guys working from home or have day-jobs at the local grocery store.  It is transforming the landscape so rapidly, we compiled a sequel to Splitting Pennies entitled Splitting Bits – Understanding Bitcoin and the Blockchain – available on Amazon Kindle for $2.99 and Paperback $9.99.
As Currency experts, we found nothing unusual in the Bit World, it’s just FX 2.0 and hopefully a catalyst for real global financial reform beyond the scope of the myopic Dodd-Frank Consumer Rip Off and Exploitation Regulation that have plagued the US consumer going on 5 years now.  As we’ve explained in our previous work, Splitting Pennies – FX is the basis for the global financial system.  Don’t forget that Bitcoin is denominated in US Dollars.  While FX is the least understood market in the world it is also the most important.
Just remember one thing – customers (business) need currency, they don’t need stocks or Crypto.  Take any business as an example, McDonalds (MCD) is always a great FX example – they need foreign currency as they accept it in more than 110 countries worldwide.
forex
And being based in Chicago, they need to repatriate those currencies into US Dollars, making them one of the biggest FX traders in the world.  So where does Bitcoin fit into all this?  At the moment, it doesn’t.  Of course that’s all changing – and changing quickly.  The news changes by the day – as the Bit Paradigm goes mainstream.  The current market cap of the entire CryptoCurrency Market is $170 Billion according to Coinmarketcap.com.
While that is still far away from traditional markets, the growth rate is beyond parabolic.  Skeptical traders should remember the late 90’s when fears about the Euro kept investors away.  Just take a look at this Monthly EUR/USD chart showing the Euro’s rise against the dollar from lows of .83 to highs of 1.58 before settling into the range that it’s been in recently:
Euro Historical
The Red line from .83 to 1.58 is about 190% or double – and traders should also bear in mind in FX there is a lot of leverage, so the 100% return in 6 years could have been 1000% or greater (many funds did profit from this simple trade).
Of course, the real money in FX is in algorithmic trading, what the banks learned the hard way.. But the Euro is a great example of a synthetic currency that was created artificially, and finally succeeded to be an alternative to the US Dollar as a world reserve.  Although the technicalities of Bitcoin are far different, the gestalt is the same – Bitcoin is a currency created artificially, backed by nothing, and is increasing in value because people believe that it will be used in the future and that the price will go up.  Just like there’s nothing behind Bitcoin, there’s really nothing behind the Euro – with one key difference.  It’s possible for the ECB to print (mint) as many Euros as they want, but it’s not possible to do this with Bitcoin because of the design (there is a limited number of Bitcoin) and because there’s no central bank behind it.
The big story of currency trading Crypto is of course, new alt-coins other than Bitcoin, which are being issued so rapidly it’s impossible to even keep track of them.  Coinmarketcap.com lists 1170 different Cryptocurrencies, you can see the full list here.
For a detailed breakdown of how you can profit from trading Bitcoin, checkout our new book Splitting Bits.