Bitcoin dropped from $10000 to $7700. And no one knew why. Even the biggest whales in closed private groups were clueless.
Some will show you a couple of negative news. Others will share theories and conspiracies. Even Technical Analysts will tell you something new. Post-crash, many traders will bring Warren Buffet’s idealogy into the picture:
Bitcoin fell? You should be greedy, they say.
But there is something else going on with every price drop. A manipulation untold and unknown to many. In fact, popular U.S lawyer and former litigator Jake Chervinsk has a couple of reasons to share.
On Twitter, he says:
– Bitcoin drops 20% over a few days
– There’s no simple explanation for why
– The drop made big money for offshore unregulated margin trading platforms
The unregulated margin trading platforms are a major concerns. These are crypto exchanges away from the laws — and they have remained untouched due to boundaries.
What goes on internally in these exchanges has remained a secret affair.
Such platforms have an advantage. They can make profits at the expense of others. How is it done? Through margin trading. Longing or shorting a position when you have investors as your customer gets easy.
As they own the exchange, and its users, making money is a no-brainer. It is another oppurtunity to make profits. Especially when bitcoin is volatile as it has been in the past few days.
Yet what is really important is the existence of such platforms.
SEC Did Issue A Warning
Not too long ago, SEC said that several of these unregulated exchanges appear to be SEC-regulated even though they are not. In such a case, SEC can only issue a warning — and not clamp down on these exchanges.
They can’t name them because there are hundreds of such exchanges out there.
In fact, a study conducted by Bitwise also showed most of these unregulated exchanges fake the numbers. The trading volume you see is not real — and 95% of it is wash trading.
Of the roughly $6 billion reported volume in March, only $273 million was legitimate.
What Can Be Done?
Jay Clayton, Chairman of Securities and Exchange Commission (SEC), says investors should be cautious. And not trade bitcoin on a large scale until everything is regulated and monitored.
The fact is: the existence of unregulated crypto exchanges will continue.
It aligns with the philosophy of blockchain and cryptocurrency. There are no laws, or restrictions around anything.
Yet the transparency is missing when you think about it.
But with mainstream cryptocurrency exchanges embracing the laws, and playing by the rules, such manipulative exchanges should take a hit. And fade away into the darkness in due course.
This will take its own time.