Bitcoin [BTC]: Scam Exchanges Haunt Short and Long-Term Price Action

The sudden crash in Bitcoin [BTC] on Saturday shook out many over-leveraged perpetual swap positions with over $250 million in long liquidation on BitMEX alone. Since the crash occurred 2 days prior to the Bitcoin halving, most suspect front running of the halving sell-off. Nevertheless, the magnitude of the drop was significant in a very short interval of time.

Nouriel Roubini, American Economist and a staunch crypto critic tweeted,

Bitcoin crashes by 15% in 7 minutes on NO news: a rigged, totally manipulated, whales-controlled market where most transactions (90%) volumes are false as exchanges pretend to have liquidity they don’t have. Massive pump & dump, spoofing, front running, wash trading! Total Scam!

bitmex 15 min chart
XBT/USD 15-Minute Chart on BitMEX (TradingView)

There are numerous derivatives exchange in the market which offer up to 100x leverage on their platform. Moreover, this does give the opportunity to high volume traders to crush the liquidity providers on the long or short side. Mati Greenspan, financial and crypto analyst, notes,

Too many scam exchanges out there offering 100X leverage causes this type of volatility.

Treacherous Road in the Year Ahead

While it is believed to drive only the short-term price of Bitcoin, in the last couple of years have had many instances of derivatives exchanges dominating the price action.

Furthermore, the scams of the past continue to keep the hodlers at unease. The massive scam of over 850k Bitcoins now in 2014 on Mt. Gox and the most recent $3 billion Plus Token scam creates fear of massive dumps in the future as well. The Trustees of the MT. Gox exchange hold nearly $1.3 billion in Bitcoin to be distributed among creditors. The deadline for the decision has been pushed to 1st July by the Tokyo Count presiding over the matter. 

The PlusToken sell-off also slowed down towards the end of 2019, and the fear around large-volume sell-offs from the scam is still prevailing in the markets. Tyler D. Coates. derivates trader and chart analyst, noted in his long-term view on Bitcoin,

I think the next (last) Mt Gox / Plus Token dump will be the best opportunity to accumulate $BTC since 2013.

A Way Up

On the bright side, the increasing adoption of Bitcoin among retail and high-volume investors is evident in the increase of Bitcoin hodlers over the years. The volume of spot exchanges like Coinbase also witnessed considerable increase in volume analogous to bull markets in the past.

btcusd daily chart
BTC/USD Daily Chart on Coinbase (TradingView)

Furthermore, institutional trading platforms like CME and Bakkt continue to improve the outlook on the manipulation claims, as realistically all markets are eventually driven by short or long-side liquidity. The price of Bitcoin [BTC] at 3: 30 hours UTC on 11th May 2020 is $8705.

Do you think will be able to stay above $10,000 for a majority part of the year? Please share your views with us.