They Are Manipulating The Crypto Markets! Here’s How! 😱

The sword of justice has been swinging recently for some of crypto’s most notorious crooks. SBF and Alex Mashinsky await trial in the United States, while Singapore yesterday detained Three Arrows Capital’s co-dickwad Su Zhu. Kyle, if you’re reading this, it’ll be your turn soon enough.

Sadly though, these scumbags are only the most visible of crypto’s bad guys. Others continue to operate behind the scenes and their MO is a lot harder to detect and to combat. They are the market manipulators - insiders who are using and abusing their status to profit at everyone else’s expense. 

A recent report by crypto research company Solidus Labs has delved deep into crypto’s market manipulation problem and its findings are eye-opening. It looks at the principal ways in which market manipulation takes place; examines which entities are likely to be responsible and reveals where these shady shenanigans are taking place. It’s a fascinating deep dive into one of crypto’s darkest corners.

In today’s video, we comb through this report and extract its juiciest findings. We also look at what these conclusions mean for crypto, what steps are being taken to combat market manipulation and what even more pressing issues lie ahead. 

You can watch that video here.

📈 Crypto Market Forecast 📈

This is going to be a very big week for crypto in more ways than one.

There are lots of crypto and macro catalysts that could move the market, and the most significant one is the government shutdown (or lack thereof). Whether or not the US government shuts down is not really relevant. What’s relevant is how the markets react to this news when the bell rings tomorrow, specifically the bond market. 

In case you missed the memo, long-term interest rates (yields on US government bonds) have been rising fast over the last few weeks. This is due to a combination of factors including rising inflation expectations as a result of rising oil prices, and the selling of US bonds by the US Treasury - and by countries like China and Japan supporting their currencies. 

This is a problem for both crypto and stocks, because rising interest rates (of any kind) are inversely correlated with price action in these markets. To be honest, the correlation between rising rates and the crypto market has been a lot weaker recently, but there’s evidence to suggest that this correlation is slowly but surely coming back. 

This correlation makes sense for proof of stake cryptocurrencies like ETH which must essentially compete with government bonds for institutional capital. Think about it - why would an institution buy and stake ETH - a risky asset - when they can buy US bonds - the safest asset - and earn an even higher yield? This explains ETH’s recent weakness. 

So, when the markets open tomorrow, pay close attention to what US bond yields do, including the US dollar (because it’s also inversely correlated with the crypto market). Pro tip - you can get a sense of what’s coming by analysing the Asian markets, which of course open first. 

In terms of crypto factors, the big one is SBF’s upcoming trial, which is long overdue. According to Cointelegraph, the trial will take place over 6 weeks and will consist of a whopping 21 days in court. It’s safe to say that there will be no shortage of information coming out of this that could cause the crypto market to pump or dump. 

Not only that, but it looks like most of these court dates will happen in October - fifteen of them to be exact. The first one is this Wednesday (4th October). The second is on Thursday, and the third is on Friday. If you look at the schedule in the Cointelegraph article I linked above, you’ll notice that there’s basically a trial date for every weekday this month. No rest for the wicked. 

At the same time, the SEC is expected to approve an Ethereum futures ETF in the near future, possibly as soon as tomorrow (depending on what happened with the government shutdown over the weekend). Of course, a futures ETF will have no direct impact on ETH’s price, but it will nonetheless be seen as a step towards more crypto ETF approvals - bullish, in other words. 

As it so happens, an Ethereum conference will also be taking place this week in Milan. Expect to see lots of exciting announcements coming out of it. If we’re lucky, Ethereum developers will give more updates about Ethereum’s upcoming upgrades. With all the bearish sentiment around ETH these days, some hopium would be much appreciated.

It’s also going to be interesting to see what happens to the crypto market now that Coinbase has opened up its futures trading for retail traders around the world. Some of you might recall that Coinbase launched its offshore derivatives exchange back in May. Some would say that this puts Coinbase in a perfect position to take market share from others offshore. 

All that’s left is for something to happen that spooks offshore exchange users into jumping aboard Coinbase’s ship. Let’s hope nothing like that happens this week. 

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👉 Check out our deals page! 

🔥  Gensler Gets Grilled 🔥 

This week, the dark lord of crypto ‘regulation’ Gary Gensler faced heat from the members of the House Financial Services Committee (HFSC). Gary appeared before the committee in a scheduled hearing to address concerns about the SEC’s operations over the past few months.

While the agenda of the hearing covered a wide range of topics, including the possibility of a looming government shutdown, ESG and capital markets, a good chunk of the discussion was focused on the SEC’s seemingly malicious actions toward the digital asset industry.

In particular, HFSC Chair Patrick McHenry (R-NC) - who initiated the hearing, wasted no time in posing a straightforward yes or no question to Gary, regarding the status of Bitcoin as a security.

When it seemed like Gary was trying hard to avoid giving a straightforward answer to the question, McHenry firmly reminded him that there was more to come by describing the Bitcoin query as a “softball before harder questions.” Gary then conceded that Bitcoin was indeed not a security, while adamantly refusing to make a statement on its status as a commodity.

Following Chair McHenry, a number of other congressional representatives voiced their concerns regarding the SEC. Tom Emmer (R-MN) accused Gary of not being an “impartial regulator” and taking a “regulation by harassment approach” toward digital assets.

Rep. Emmer also pointed to a statement made by Gary last year wherein he revealed that bank executives had expressed concern over depositors moving their money from bank accounts into crypto-related exchanges and wallets. Emmer stated that this made it clear that Gary’s “relentless loyalty to the largest financial institutions” comes at the “clear expense of innovation, competition, and everyday Americans.”

Another important highlight was Gary’s conflicting logic in his responses to the questions from Ritchie Torres (D-NY). Particularly, Rep Torres asked Gary if buying a Pokemon card could be a security transaction, and therefore be subject to securities laws.

When Gary confirmed it did not qualify as a security, Torres then asked if the same classification would apply to a tokenized version (NFT) of a Pokemon card. Gary attempted to avoid answering this poser by stating that it depends on the context. To be fair, whether a particular asset is a security or not depends on representations made by the issuing party.

However, the point to note here is Gary’s reticence when it came to the word “tokenization.” Especially when you consider that even issuers of physical products can make fraudulent representations of future profits to investors. This reluctance seems to indicate - as Torres noted - that Gary has a “profound prejudice against blockchain technology.” This is an attitude that should be absent in an impartial regulator.

However, amid all the incoming fire, a voice reached out to let Gary know that he was not alone. That voice, which belonged to Rep. Maxine Waters (D-CA), started to sing Gary’s and the SEC’s praises, stating that the agency was “very much implementing the priorities” that she and her Democratic colleagues had “championed". These include Gary’s actions on crypto.

The sting was somewhat taken out of these words when it became clear that Waters was reading blindly from a script prepared by her overlords. While on the subject of the SEC’s enforcement actions against crypto, she pronounced Bitcoin as “Bitcom”, Terra Luna as “Terror Luna” and Ponzi scheme as “Ponzi scream” – all within the same sentence. Maybe her software needs updating. 

Malfunctioning Dembots aside, it appears that pressure is mounting on the SEC. The crypto community, along with other investment communities, is increasingly frustrated with Gary and his gang. As HFSC Chair McHenry hinted at the start of the hearing, it seems a congressional subpoena could be the last resort for getting the SEC to comply and finally provide consistent, fair and transparent guidelines for its treatment of digital assets.  

📊 Personal Portfolio 📊 

BTC 36.98% | ETH 30.26% | USDC 18.31% | USDT 7.32% | USD 3.70% | ATOM 2.39% | DOT 1.04%

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Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.