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Market manipulation: The big boys want to play

February 7, 2018

Banks and deep-pocketed individuals have a history of abusing their power to reap significant financial returns. The financial collapse in 2007/08 is testament to that. The banks got greedy and started selling more mortgages to people who couldn't afford it, whilst stringing the rating (puppet) agencies to prop up the bond ratings so the average joes wouldn't know that the economy was on the verge of collapse. This allowed banks to run away from the crisis whilst the US citizens were faced with the burden of unemployment and significant loss of net worth. But why is this important? Where there is a lack of regulation in an industry (the mortgage market -pre 2008) the big players will abuse their power and make as much money as possible from it. Whilst the nature of the cryptocurrency market is considerably dissimilar to the housing market pre 2008, the lack of regulation is the common ground between these two entities.

 

I'm not implying that banks are manipulating the cryptocurrency market, rather, I am depicting how greed can lead to the manipulation of an unregulated market and I believe that is what we are witnessing currently. 

 

  Bitcoin has lost more than 60% of its value in under a month

 

Why?

The cryptocurrency market is different to any other financial market that we know. The early adopters of the cryptocurrency market are the cryptographers, nerds, computer scientists, wannabe entrepreneurs, etc... some would label them the 'outsiders' of society. These are the people that have reaped the rewards of entering the market early and becoming the next-generation millionaires. But what about the bankers? The Goldman kids? The investors with friends in high places? These people want in on the action, but they don't want to pay the 'premium' prices, instead, they prey on the weak hands of many cryptocurrency investors. 

 

Lets look at some of the questionable events in the past 30 days which has led to the Bitcoin price losing more than 60% of its value. 

 

South Korea ban on cryptocurrency trading 

The likes of Reuters, CNBC, and the Financial Times went out of their way to post misleading articles suggesting that South Korea was planning to 'ban' cryptocurrency trading. The South Korean government never stated that there would be at an outright ban, rather it was planning on implementing compulsory KYC/AML policies. This is becoming the normal standard for cryptocurrency exchanges. The major news institutions ignored the real story and chose to mislead investors with eye-catching headlines such as 'South Korea plans to ban cryptocurrency trading'. This headline from Reuters on January 11th, echoed across the mainstream press. This caused a major panic sell-off in the days following. The scaremongering articles sent the BTC price tumbling from $14,000 to $9,000 within 5 days of these articles going live. Fast forward to January 31st, and Reuters posts another article, this time stating that 'South Korea says no plans to ban cryptocurrency exchanges'. Somebody should inform Dahee and Cynthia Kim (article authors) that this 'news' is not news. Seasoned investors were well aware of the regulations that were being put into place by the South Korean government since last year. This 20 day gap between the articles witnessed the cryptocurrency market shed over $200 billion in market capitalisation. The FUD (Fear, Uncertainty and Doubt) spread amongst the cryptocurrency community via traditional news outlets caused the majority of cryptocurrency prices to lose significant value, a perfect opportunity for the big players to purchase vast amounts of cryptos at a heavily discounted price. 

 

Court order subpoena on Bitfinex/Tether

The CFTC sent subpoenas to Bitfinex and Tether on December the 6th as Bitfinex is being accused of introducing a coin, 'Tether' and pegging it to the USD, so 1 tether = $1 (in reserves). Bitfinex is being accused of artificially pumping the Bitcoin price in the past 4 months through the mass supply of tether. I'm highly skeptical about the relationship between Bitfinex and Tether, but I'm here to discuss the bigger picture, rather than the potential wrongdoings of an exchange. Major news outlets such as Bloomberg and CNBC chose to post articles on this subpoena on the 30th of January, thats more than 55 days later then the ordering of the subpoena. Some may say that the information was only made available at the end of January but that is very far from the truth. Bitcoin.com made the lawsuit apparent in December. It would be naive to suggest that these news outlets were not in-the-know about any subpoenas sent to any major exchanges, especially Bitfinex, who has faced previous scrutiny by US news outlets. The planned FUD by major news outlets was done in timely order to put even more pressure on the price. The South Korean 'ban' story had lost pace and credibility, so the next day, the media ran with the story that was meant to be news on December the 7th, rather than the end of January. 

 

 Erik Voorhees hits the nail on the head. Confused? search up 'Magic Money Tree'. 

 

India 'ban on cryptocurrency' 

The strategic plan to manipulate the price through FUD regarding South Koreas regulation was wearing off, especially as South Koreas finance minister came out and said that they were only proposing tighter regulation on the exchanges (which we already knew). The big players needed another way to further manipulate the price. On February 1st 2018, Indian finance minister, Arun Jaitley disclosed his budget plans. He mentioned that cryptocurrencies cannot be used as 'legal tender', this is consistent with the negative sentiment the Indian government have expressed in regards to cryptocurrency. They've been skeptical about cryptocurrency for a long time, so it's no surprise that they do not deem it as legal tender. However, this point about legal tender was blown out of proportion with many news outlets describing it as an outright ban on cryptocurrency, which was once again, false.

 

India is one of the largest markets for Bitcoin traders, so its no surprise that the target was the Indian market in order to cripple a large trading market thus leading to a panic sell off. Fortune had originally posted an article headlined "Bitcoin price slides again as India announced Ban Plan" only for Fortune to later amend the article headline to "India just caused the price of Bitcoin to slide again". The damage had been done by the time Fortune amended the headline, the article was read by millions across the world, the Bitcoin price declined significantly from $10,000 to $6,000. The mainstream press had once again been used as a platform to manipulate the price of Bitcoin.  

 

Monkey see, Monkey do

The cryptocurrency market has witnessed a meteoric rise in the past few years. Many are attracted by the proposition of becoming overnight millionaires in a market promising exponential returns. Majority of cryptocurrency investors are making uneducated bets hence why the market is extremely sensitive to news headlines. A proportion of these investors in the space have no idea what they're investing in, thus any negative news about the cryptocurrency market initiates a panic sell-off. But why am I telling you this? Well, what do you get when an extremely lucrative market has many uneducated amateur investors? A naive and unsuspicious market that can easily be manipulated.

 

You are what you read

The nature of the cryptocurrency market structure allows the bad and greedy guys to get away with whatever they please. This sort of manipulation is going under-the-radar with many uneducated readers caving in to these misleading stories. Many are quick to spout lazy comments such as "The bubble is about to burst", and "I told you so".

 

Bitcoin has been through a lot worse then the events in the past 2 months, MtGox and the Silk Road fiasco to name a few. The concept of cryptocurrency and the blockchain is still relatively new to the world, so I find it jarring when reputable news outlets such as CNBC, Reuters etc... spout FUD about the cryptocurrency market when they do not have one blockchain or cryptocurrency expert amongst their ranks. These age old news outlets are still trying to figure out what cryptocurrency is, until they do so, news outlets such as CCN (Cryptocoinsnews) and Coindesk are favourable platforms if you want to really know whats happening in the market. Going to Bloomberg for reliable cryptocurrency news is like asking a poor man for advice on becoming rich, lots of opinions, none that carry substance. 

 

Verdict 

From the start of January to yesterday, we witnessed an insane amount of misleading news stories regarding 'Bitcoin being banned'. The negative hysteria towards cryptocurrency has reverberated across the whole market. The sequential order of this FUD material is suspicious, even more so, after the SEC announced their lenient approach on cryptocurrency yesterday, initiating a recovery after the market had been battered. Its as if it was all planned...

 

For regular crypto updates and announcements, follow my insta @jscrypto

 

 

 

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