Welcome to Chain Letter! Great to have you. Here's what's new in the world of blockchains and cryptocurrencies. | | The old fashioned “pump and dump.” An impressive investigation by the Wall Street Journal provides a glimpse of just how pervasive price manipulation schemes are in the cryptocurrency marketplace. By reviewing trading data and online communications between traders from the past six months, the newspaper found 175 pump and dump schemes for 121 different crypto-tokens, which together generated $825 million in trading activity during the past six months and caused “hundreds of millions in losses for those caught on the wrong side.”
It’s a classic bit of hucksterism from a bygone era: hyping a particular asset enough entices new investors to buy in, which “pumps” its price before insiders “dump” it for a profit. The practice, outlawed in 1930s, was famously revived in the 1990s by Stratton Oakmont, a over-the-counter brokerage in New York founded by Jordan Belfort, now known as the “Wolf of Wall Street.” Instead of the boiler rooms of yore, crypto pump-and-dump fraudsters gather and organize using messaging apps, particularly Telegram. The investigation found that the popular exchange Binance, which lists hundreds of coins, including many thinly traded ones that are particularly vulnerable to manipulation, is often used for pumps. “Cryptocurrency exchanges are unregulated markets, so the kind of market manipulation banned on, say, the New York Stock Exchange, can essentially be carried out with impunity,” Ben Yates, an attorney at London-based RPC, told the WSJ. | | Speaking of the New York Stock Exchange, we just learned on Friday that Intercontinental Exchange, NYSE’s parent company, plans to launch a cryptocurrency exchange. The firm will form a new company, called Bakkt, which will work with Microsoft, BCG, Starbucks, and others to create an “integrated platform that enables consumers and institutions to buy, sell, store, and spend digital assets on a seamless global network.” It said the effort is meant to “address the evolving needs in the estimated $270 billion digital asset market.”
Many cryptocurrency enthusiasts cheered the development, which is likely to lead to more widespread adoption, further legitimization of the market, and, potentially, price increases for Bitcoin and other cryptocurrencies. But wasn’t the point of Bitcoin to disintermediate the traditional financial system? As Dogecoin creator Jackson Palmer tweeted: “Make up your mind.” | | Is Japan really the crypto trading king? Widely-cited analytics sites have consistently indicated that more than half of all Bitcoin trading is denominated in the Japanese yen. But a new analysis by Coindesk casts doubt on what has become received wisdom in the world of crypto. The sites have not been distinguishing between the “spot” market trading, in which actual bitcoins are traded for yen, and the trading of derivatives, which reflect bets on the price of Bitcoin in which no Bitcoin is actually traded. But the sites have been excluding dollar-denominated derivatives markets, CoinDesk says, so the yen vs. dollar comparison has not been apples-to-apples. When these factors are accounted for, the dollar dominates real Bitcoin trading.
So what? For one thing, it goes to show how limited our understanding of the global cryptocurrency market still is. And if the dollar’s role is much bigger than we thought, it could inspire US regulators to be more proactive toward establishing international cryptocurrency regulations—similar to how they shaped global anti-money laundering practices after September 11th. | | Loose Change Fill your pockets with these newsy tidbits. | | | West Virginia will offer statewide mobile phone voting, using a blockchain-based application, in the midterm elections. ( CNN) | | | | Macrogen, a DNA sequencing company based in South Korea, plans to develop a blockchain network for sharing genomic data. ( CoinDesk) | | | | Contrary to some reports, Starbucks’s new partnership with Intercontinental Exchange does not mean it will accept Bitcoin. ( Motherboard) | | | | Coinbase Custody, a service for storing large amounts of cryptocurrency for institutional clients, is exploring the addition of 40 more crypto-tokens. ( Fortune) | | | | Mobile trading app Robinhood has added support for Ethereum Classic. ( CoinDesk) | | | The Money Quote “If I could only bleed for the blockchain, its ledger, for all to see, would reveal that I am a coin.” —From the artist statement of Kevin Abosch, a conceptual artist who has recently turned to the blockchain for inspiration. (The Next Web) | | | |
