South Korea Seeks to Freeze 3,313 Bitcoin Allegedly Linked to Luna Founder Do Kwon – Featured Bitcoin News

South Korean prosecutors are seeking to freeze 3,313 bitcoins at two cryptocurrency exchanges allegedly tied to luna founder Do Kwon. The coins were moved soon after a South Korean court issued an arrest warrant for the Terraform Labs co-founder. Luna Foundation Guard has denied transferring the coins. Korean Authorities Ask Crypto Exchanges to Freeze Bitcoin.

South Korean authorities have reportedly asked cryptocurrency exchanges Kucoin and Okx to freeze 3,313 bitcoins allegedly tied to Terraform Labs co-founder Kwon Do-hyung, also known as Do Kwon. The coins were transferred to the trading platforms soon after a warrant was issued for Kwon’s arrest in South Korea.

On Tuesday, an official at the Seoul Southern District Prosecutors’ Office confirmed to Bloomberg that requests have been sent to the two cryptocurrency exchanges to freeze the 3,313 BTC.

The coins were transferred to the trading platforms from a wallet allegedly linked to Luna Foundation Guard (LFG) that was created on Sept. 15, according to crypto researcher Cryptoquant. The researcher told the publication: Cryptoquant specified new bitcoin addresses owned by LFG based on transaction patterns, adjacent flows and material non-public information.

However, Luna Foundation Guard denied the allegation Tuesday evening. The group tweeted its treasury’s bitcoin address, adding: “LFG hasn’t created any new wallets or moved BTC or other tokens held by LFG since May 2022.” Do Kwon Says: ‘I’m Making Zero Effort to Hide’

The luna founder’s whereabouts are currently unknown. He was believed to be in Singapore but the Singapore police force said earlier this month that he is currently not in the city-state. Kwon has maintained that he is not “on the run,” tweeting Monday: I’m making zero effort to hide. I go on walks and malls.

The Seoul Metropolitan Police have asked various crypto exchanges to ban Luna’s capability of withdrawing company funds, the report said. It was not clear which exchanges were asked or whether they have complied. Terraform Labs lost $30 billion this month when Terra’s UST stablecoin and LUNA cryptocurrency went into a death spiral, costing investors billions globally.

The associated Luna Foundation Guard was charged with protecting UST’s peg using a war chest of billions of dollars in bitcoin (BTC); it ultimately failed. Terraform Labs CEO Do Kwon is already under the financial crimes microscope and is facing a tax evasion investigation by a South Korean police unit known as the “Grim Reaper.” Luna Foundation Guard did not respond to a request for comment by press time.

A South Korean court issued an arrest warrant for Kwon on Sept. 14. He is accused of fraud after the collapse of the cryptocurrency luna (now called luna classic (LUNC)) and stablecoin terrausd (UST). In addition, the country’s ministry of foreign affairs is reportedly planning to revoke his passport.

Moreover, Interpol has issued a Red Notice for the Terraform Labs co-founder. “A Red Notice is a request to law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action,” Interpol’s website details, adding that “Red Notices are issued for fugitives wanted either for prosecution or to serve a sentence.”

By: Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

Source: South Korea Seeks to Freeze 3,313 Bitcoin Allegedly Linked to Luna Founder Do Kwon – Featured Bitcoin News

Critics by:

When the Luna crypto network collapsed, it’s estimated that $60 billion got wiped out of the digital currency space. Algorithmic stablecoins (UST) are not the same as Tether or USD Coin, which are backed by actual dollars or assets stored in a bank. An arrest warrant has been issued for Do Kwon, the co-founder of Terraform Labs, where the sister tokens Luna and TerraUSD were held.

Terra network and its leader, Do Kwon, rose to prominence in the cryptocurrency world over the course of four years, all ending in a disastrous fall from grace. The Luna crypto network collapsed in what’s considered the largest crypto crash ever, with an estimated $60 billion wipeout, shaking the global digital currency market.

There are two stories regarding Luna crypto: the TerraUSD/UST stablecoin and the actual Luna coin. Once Luna and UST crashed, there was a total liquidity crunch in the cryptocurrency space that caused an even more catastrophic loss of value. The crypto community still hasn’t recovered.

You may have heard of TerraUSD and Luna, here is a quick breakdown of what they are exactly. Lots of moving parts within the Luna network ahead of its collapse.TerraUSD (also known as UST) and Luna are two sister coins on the same network.

Terra is a blockchain network, similar to Ethereum or Bitcoin, that produces Luna tokens. The network was created in 2018 by Do Kwon and Daniel Shin of Terraform Labs. Terraform Labs created the UST coin to be an algorithmic stablecoin on the Terra network. While other stablecoins (USDC or Tether) are fiat-backed, the UST would not be backed by real assets. Instead, the value of UST would be backed by its sister token, Luna. More on that later.

Stablecoins are supposedly safe havens in the crypto space since they’re meant to have a fixed value of around 1 USD. The goal being, a steady store of value for investors, unlike other volatile coins (like ethereum).Luna was Terra’s blockchain native token, similar to how ether is used on the Ethereum network. Luna had four different roles in the Terra network:

  1. A method to pay for transaction fees in the Terra network.
  2. A mechanism for maintaining Terra’s stablecoin peg.
  3. Staking in Terra’s delegated proof of stake (DPoS) to validate network transactions.
  4. Participation in the platform’s governance by adding to and voting on proposals when it comes to changes in the Terra network.

How much was Luna worth?

A Luna coin was going for around $116 in April and ended up dropping to a fraction of a penny before being delisted. Before that, the coin went from being worth less than $1 in early 2021 to creating many crypto millionaires within a year. This led to Kwon’s cult hero status among (some) retail crypto investors. Many success stories popped up in the media about how regular folks were able to get rich from Luna.

The Luna token skyrocketed about 135% in less than two months until its peak in April 2022. The largest incentive was that you could stake your UST holdings on the Anchor lending platform for a 20% annual yield. Many analysts felt that this absurd rate was unsustainable.

The Anchor Protocol was a decentralized money market built on the Terra blockchain. This platform became popular for its aforementioned 20% yield for UST holders who deposited their tokens on the platform. Then Anchor would turn around and loan the deposit to another investor. Many skeptics were concerned about where the money came from to pay these rates. Some considered this an obvious Ponzi scheme. At one point, as much as 72% of UST was deposited in Anchor because the platform was the primary driver of demand for Terra.

What happened to UST?

Before we look at this crypto disaster, we need to discuss stablecoins briefly. A stablecoin is pegged to a more stable currency like the US dollar. Tether and USDC are both tied to USD. Stablecoins are used to hedge against volatility in the crypto space. For example, let’s say that Ether’s price is $1,000. You could exchange one Ether for 1,000 USDC tokens. When investors expect a hit in the crypto market, they put their money into stablecoins to protect their assets.

The UST coin was not backed by an actual US Dollar but rather an algorithmic stablecoin. The belief was that Terraform Labs could use clever mechanisms along with billions in Bitcoin reserves to maintain the peg of UST without the backstop of the USD. To create UST you have to burn Luna. So, for example, when Luna token’s price was $85, you could trade one token for 85 UST. This deflationary protocol was designed to ensure there was long-term growth for Luna.

For UST to retain its peg, one UST could be changed for $1 worth of Luna at any time. If UST slipped, traders could make money from buying UST and then exchanging it for Luna. Both Luna and UST crashed once UST lost its peg to the dollar, which was what qualified it as a stablecoin.

TerraUSD was risky because it wasn’t backed by cash, treasuries or other traditional assets like the popular stablecoin tether. The stability of UST was derived from algorithms that linked the value to Luna. Many experts were skeptical that an algorithm could keep two tokens stable.

Why did LUNA crash?

The Luna crypto crash was caused by its connection to TerraUSD (UST), the algorithmic stablecoin of the Terra network. On May 7, over $2 billion worth of UST was unstaked (taken off the Anchor Protocol), and hundreds of millions of it were quickly liquidated. There’s debate as to whether this happened as a response to rising interest rates or if it was a malicious attack on the Terra blockchain. The huge sell-offs brought down the price of UST to $0.91, from $1. As a result, traders started to change 90 cents worth of UST for $1 of Luna.

Once a large amount of UST had been offloaded, the stablecoin started to depeg. In a panic, more people sold off UST, which led to the minting of more Luna and an increase in the circulating supply of Luna. Following this crash, crypto exchanges started to delist Luna and UST pairings. Long story short, Luna was abandoned as it became worthless.

What happened after the Luna crash?

The Luna meltdown impacted the entire cryptocurrency market, which was already highly volatile and experiencing difficulty at the time. It’s estimated that the Luna crash ended up tanking the price of bitcoin and causing an estimated loss of $300 billion in value across the entire cryptocurrency space. Crypto leaders Voyager and Celsius filed for bankruptcy. Three Arrows Capital (3AC) was forced into liquidation.

Many people lost their life savings and suffered financial hardships due to the Luna crypto crash. If you do a quick search online, you’ll find many of these terrible stories. Many loyal Luna fans (who referred to themselves as “Lunatics”) took to Reddit threads to share their disastrous stories. One retail crypto investor even confessed that they lost their savings of $20,000 in Luna.

The only winners were those who exited their positions before the crash. One winner that we have to highlight is the hedge fund Pantera Capital. They saw a 100x return on an initial investment of $1.7 million. The company liquidated its Luna position prior to the collapse for a return of $171 million.

Profanity May Be The Cause Of Crypto Trading Firm Wintermute’s $160 Million Hack

Wintermute, a London-based cryptocurrency firm that trades billions of dollars’ worth of digital assets daily, lost $160 million in a hack early on Tuesday. Founder and CEO Evgeny Gaevoy says he learned of the hack a few minutes after it took place, around 6:00 AM London time.

An hour later, he announced the theft on Twitter without saying how it happened. All told, the hacker stole about $120 million worth of Wintermute’s “stable coins” including USDC and USDT, $20 million worth of its bitcoin and ether and another $20 million worth of lesser-known cryptocurrencies.

Gaevoy explained to Forbes that, although the investigation is still ongoing, the hack likely originated with a service called Profanity, which generates “vanity addresses” for digital cryptocurrency accounts to make them easier to work with. Otherwise, crypto accounts are roughly 30-character strings of varied letters and numbers.

Last week, a blog post by another crypto firm revealed a security vulnerability with Profanity’s code. The gist of the problem: someone with enough computing power can generate all the possible keys or passwords created for a Profanity vanity address. Then they can scan the associated accounts to see how much money they hold and steal the funds.

Wintermute had been using Profanity not to create easy-to-remember names for digital accounts, but to lower its trading transaction costs, since that’s another feature of Profanity’s service, Gaevoy says. When Wintermute learned of the vulnerability last week, they took steps to technologically “blacklist” their Profanity accounts, shielding them from being liquidated.

However, due to their own “human error,” one of the 10 accounts didn’t get blacklisted, according to Gaevoy, which probably resulted in the $160 million heist. These trading accounts were part of Wintermute’s “decentralized finance” or DeFi business, where it makes rapid trades on decentralized exchanges like Uniswap and Sushi Swap that aren’t controlled by a single entity.

Since the DeFi ecosystem is young, highly experimental and designed to be more openly accessible than traditional finance, it doesn’t have the same safeguards that centralized exchanges like Coinbase has. “You don’t have any circuit breakers. You don’t have any two-factor authentication to help store your keys,” Gaevoy says.

In 2021, DeFi hacks totaled $1.3 billion, according to research by security firm Certik. Analytics firm Chainalysis estimates that North Korea-linked groups stole $1 billion from DeFi protocols in the first eight months of 2022. Some tried and true security practices in crypto, such as using external hardware wallets or “multi-sig” applications that need to be digitally signed by multiple parties before a transaction is approved, can’t be used for the type of automated trading Wintermute does.

“You need to sign transactions on the fly, within seconds,” says Gaevoy. So they had to invent their own tech tools and security protocols. “Ultimately, that’s the risk we took. It was calculated.” DeFi has been a flourishing part of Wintermute’s business in prior years. “It didn’t work out this year,” he admits.

The Wintermute CEO has some leads on who the hacker might be, and he’s investigating them “both internally and with the use of external partners.” He’s hoping that the hacker will become a “white hat” who returns most of the funds, and he’s now offering a 10% bounty, or $16 million, if the hacker gives back the remaining $144 million. He tweeted that Wintermute “would prefer to resolve this in a simple way, but the window of opportunity to do so is closing fast due to the high profile of this exploit.”

Despite the new $160 million hole in its balance sheet, Gaevoy says Wintermute is on sound financial footing, with more than $350 million in equity. “We are one of the very few crypto-native proprietary trading firms that can actually take this punch,” the CEO says. For a couple hours after the hack, the company paused its OTC trading desk, where it facilitates large trades between other parties. But that has resumed to its normal operation.

I lead our fintech coverage at Forbes and also cover crypto. I edit our annual Fintech 50 and 30 Under 30 for fintech, and I’ve written frequently about leadership and corporate

Source: Profanity May Be The Cause Of Crypto Trading Firm Wintermute’s $160 Million Hack

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Critics by  

As per 1inch’s findings, the private keys linked to vanity addresses could be calculated with brute force attacks. A hacker managed to steal $3.3 million worth of cryptocurrencies from several Ethereum addresses generated with the “Profanity” tool. The funds were drained even after the decentralized exchange aggregator 1inch warned users about discovering a severe vulnerability putting millions of dollars at risk.

It had previously advised users owning wallet addresses generated with the Profanity tool to transfer their assets to a different wallet.

1inch Security Report

In early 2022, 1inch contributors observed that Profanity used a random 32-bit vector to seed 256-bit private keys and suspected it could be unsafe. Upon further investigation, more suspicious activity was noted, signaling that Profanity wallets were compromised.

“The 1inch contributors checked the richest vanity addresses on popular networks and came to the conclusion that most of them were not created by the Profanity tool. But Profanity is one of the most popular tools due to its high efficiency. Sadly, that could only mean that most of the Profanity wallets were secretly hacked.”

According to 1inch, Profanity happens to be a popular and “highly efficient” tool with which users are able to create millions of addresses per second. However, the procedure used by Profanity to generate the addresses was not flawless either and was susceptible to attacks.

The security disclosure report published by 1inch last week also noted that the vulnerability may have enabled hackers to “secretly” steal millions of dollars from Profanity users’ wallets for years. The contributors are currently trying to determine all the compromised vanity addresses.

Soon after the warning, blockchain investigator ZachXBT notified the attack draining over $3 million in funds. Fortunately, his tweet helped a user save $1.2 million in crypto and NFTs from the hacker who had access to their wallet.

Profanity Devs Abandon Project

According to Tal Be’ery, ZenGo’s security lead and chief technology officer, the malicious entities could have been “sitting” on the vulnerability in an attempt to get their hands on as many private keys as possible of bug-ridden Profanity-generated vanity addresses before the vulnerability was detected. However, they cashed out after it was publicly exposed by 1inch.

Meanwhile, one of the Profanity developers, who goes by the pseudonym ‘johguse’ on Github, said that they have already “abandoned” the project a few years ago. The comment regarding the same read

“This project was abandoned by me a couple of years ago. Fundamental security issues in the generation of private keys have been brought to my attention. I strongly advise against using this tool in its current state. This repository will soon be further updated with additional information regarding this critical issue.”

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More Than Half Of All Bitcoin Trades Are Fake


Within the emerging and turbulent market for cryptocurrencies, where there are no fewer than 10,000 tokens, bitcoin, is the great granddaddy, the blue-chip, representing 40% of the $1 trillion in crypto assets outstanding. Bitcoin is crypto’s gateway drug.

An estimated 46 million adult Americans already own it according to New York Digital Investment Group, and an increasing number of institutional investors and corporations are warming to the nascent alternative asset. But can you trust what your crypto exchange or e-brokerage reports about trading in the most important digital currency?

One of the most common criticisms of bitcoin is pervasive wash trading (a form of fake volume) and poor surveillance across exchanges. The U.S. Commodity Futures Trading Commission defines wash trading as “entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader’s market position.”

The reason why some traders engage in wash trading is to inflate the trading volume of an asset to give the appearance of rising popularity. In some cases trading bots execute these wash trades in tokens, increasing volume, while at the same time insiders reinforce the activity with bullish remarks, driving up the price in what is effectively a pump and dump scheme.

Wash trading also benefits exchanges because it allows them to appear to have more volume than they actually do, potentially encouraging more legitimate trading.

There is no universally accepted method of calculating bitcoin daily volume, even among the industry’s most reputable research firms. For instance, as of this writing, CoinMarketCap puts the latest 24-hour trading of bitcoin at $32 billion, CoinGecko at $27 billion, Nomics at $57 billion and Messari at $5 billion.

Adding to the challenges are persistent fears about the solvency of crypto exchanges, underscored by the public collapses of Voyager and Celsius. In an exclusive interview with Forbes in late June, FTX CEO Sam Bankman-Fried commented that there are many exchange bankruptcies yet to come.

A significant repercussion of this lack of faith in its underlying markets is the Security and Exchange Commission’s refusal to approve a spot bitcoin ETF.

Unfortunately for the bitcoin ETF hopefuls, many of these fears and criticisms are valid. As part of Forbes research into the crypto ecosystem using 2021 data, we ranked the 60 best exchanges in March. More recently we conducted a deeper-dive into the bitcoin trading markets to answer a few pressing questions:

  1. Where is bitcoin traded?
  2. How much bitcoin gets traded every day?
  3. How is bitcoin traded?

Our study evaluated 157 crypto exchanges across the world. Here are our main findings:

  1. More than half of all reported trading volume is likely to be fake or non-economic. Forbes estimates the global daily bitcoin volume for the industry was $128 billion on June 14. That is 51% less than the $262 billion one would get by taking the sum of self-reported volume from multiple sources.
  2. Tether, the world’s largest stablecoin, continues to be a dominant player in the crypto trading economy, especially when it comes to trades against bitcoin. Its current market capitalization is $68 billion, despite questions about its reserves.
  3. In terms of how much bitcoin activity takes place at these firms, 21 crypto exchanges generate $1 billion or more in daily trading activity, while the next 33 exchanges had volume between $200 million and $999 million across all contract types, spot, futures and perpetuals. Perpetual futures, or perpetual swaps as they are also known, are futures contracts that don’t require investors to roll over their positions. Binance is the clear leader, with a 27% market share, followed by FTX. Looking only at spot bitcoin, the top position is shared by Binance, FTX, and OKX. Chicago-based CME Group is the market leader in bitcoin futures trading.
  4. The biggest problem areas regarding fake volume are firms that tout big volume but operate with little or no regulatory oversight that would make their figures more credible, notably Binance, MEXC Global and Bybit. Altogether, the lesser regulated exchanges in our study account for approximately $89 billion of the true volume (they claim $217 billion).
  5. The creation of new trading assets and products such as stablecoins and perpetual futures adds complications for national authorities seeking to regulate crypto markets. Major U.S. exchanges hardly utilize these instruments or contracts in any of their trading. However, offshore exchanges make significant use of them as ways to synthetically create U.S. dollar liquidity on their platforms (they cannot get U.S. bank accounts).
  6. In the Western world and particularly in the U.S., it is tempting to think of bitcoin only trading against either the U.S. dollar or the euro and British pound. But some of the largest trading pair activity occurs against fiat currencies like the Japanese yen and Korean won and against major stablecoins like Binance U.S. dollar and the USD coin.
  7. 573 million people visit crypto exchange websites on a monthly basis.

We hope that this report builds on top of the important work done by other digital asset researchers such as Bitwise, which estimated in a March 2019 white paper that 95% of CoinMarketCap’s bitcoin trading volume was fake and/or non-economic.

Our Approach

Forbes uses quantitative and qualitative analyses to adjust trading volume reported by the exchanges. Unlike other methods that carry out tests on transactional data (and can also be duped), Forbes grades a firm’s credibility by evaluating no fewer than five datasets that together inspire or diminish confidence in a firm’s self-reported data. Data comes from four crypto media firms, CoinMarketCap, CoinGecko, Nomics and Messari, as well as multiple exchanges and two other third-party data providers.

We apply volume discounts based on a proprietary methodology that relies on 10 factors such as an exchange’s home regulator if any and volume metrics based on an exchange’s web traffic and estimated workforce size. We also use the number and quality of crypto licenses as proxy to gauge the sophistication of each crypto exchange in matters pertaining to regulation and trade surveillance.

If a firm shows a commitment to transparency by conducting token proofs of reserve or by participating in Forbes crypto exchange surveys, it qualifies for a “transparency credit” that lowers any discount that may otherwise apply.

Many of these factors were also present in Forbes’ crypto exchange ranking formula. We divided them into three categories:

Group 1: 48 crypto exchanges that were assigned discounts of 0-25% generated $39 billion of real bitcoin trading activity across all markets–spot, derivatives and futures–on June 14.

Group 2: 73 exchanges with volume discounts of 26% to 79% generated $81 billion in transactional activity (vs. $158 billion claimed)

Group 3: The remaining 36 firms were penalized with a high discount rate (80-99%) and traded $7.7 billion out of $59 billion claimed.

Despite crypto’s global nature, spot bitcoin trading activity is centered around relatively few currency pairs and stablecoins. Stablecoin USDT is the biggest, followed by the U.S. dollar. The next biggest fiat assets are the yen and won.

BTC-US DOLLAR Daily Volume

Group 1 exchanges, many of which are based in the U.S., provide $24.3 billion in daily USD-BTC liquidity, and Group 2 exchanges add $17.3 billion. The prominence of Group 1 exchanges as the main source of BTC-USD occurs across spot, perpetuals, and futures contracts. CME Group is the leading provider of bitcoin futures globally, with $2.1 billion of USD-BTC futures changing hands daily. There are at least 27 crypto exchanges–12 in Group 1–that have daily BTC-USD liquidity greater than $5 million.

BTC – U.S. TETHER Daily Volume

At $71.4 billion daily volume, bitcoin-tether (BTC-USDT) activity exceeds that of BTC-USD by 57%, with 79% generated by Group 2 crypto exchanges and 5% by those in Group 3. There are 77 exchanges–44 in Group 2, 12 in Group 1–with daily bitcoin-tether volume above $5 million. Tether is prominent across spot and perpetual futures markets, less so among the regulated futures industry, which is largely absent outside of the U.S.

BTC – U.S. DOLLAR COIN Daily Volume

U.S. dollar coin (USDC) is gaining adoption in the stablecoin arena. Daily liquidity for bitcoin-USDC was $2.15 billion, with Groups 1 and 2 splitting that total 39% and 60%, respectively. An interesting observation is that Group 2 exchanges use USDC actively in the spot bitcoin market whereas Group 1 exchanges do so with perpetuals. This different use could suggest that Group 2 exchanges may be open to the idea of supporting an alternative to tether’s dominance in the stablecoin market.

USDT and Binance USD (BUSD) each generate more volume than USDC, but the latter now has 26 crypto exchanges (17 in Group 2) with daily trading volume of $5 million or more, versus 77 exchanges for USDT and five with BUSD. If tether’s prominence begins to wane, USDC could be the stablecoin most likely to pick up its crown.

Bitcoin Trading Volume by Exchange Group

The top-10 Group 1 crypto exchanges by volume originate from across the world, with three from the U.S. (CME Group, Coinbase, Kraken), one from Singapore (Crypto.com), one from Europe (LMAX Digital), four from financial offshore centers (FTX, OKX, Gate.io, BitMEX), and one from Central America (Deribit).

Among Group 1 firms, FTX is the largest and growing at a fast clip. It wasn’t until mid 2021 when institutional funding fueled a transformation of FTX operations from a midsized unregulated exchange focused on offshore crypto derivatives to a global group of exchanges today regulated in the U.S., Japan, Europe and elsewhere. In addition to derivatives, FTX trades in crypto spot, tokenized stocks and has recently added equities.

Group 2 crypto exchanges tend to be large and possess wide product offerings. They primarily focus on growth and tend to have much less interest in being regulated where they operate. They also generally lack robust ways to track and deter wash trading. Binance is by far the largest crypto exchange in Group 2, with $34.2 billion of daily trading activity followed by Bybit with $8.9 billion. The majority of these exchanges are based in offshore havens such as the Seychelles and British Virgin Islands.

Group 3 consists of 36 crypto exchanges which, with few exceptions, are unregulated and small. Their huge self reported volume and tiny visitor number cast doubt on the possibility that a limited audience could indeed generate that much trading activity. A case in point is BitCoke, which CoinMarketCap identifies as a Hong Kong-based, Cayman Island-domiciled exchange that purportedly generated $14 billion daily–mostly from BTC-USDT perpetuals.

SimilarWeb, however, indicates that the exchange’s domain receives less than 10,000 monthly visitors–with 53% coming from Argentina alone. The discrepancies in volume versus traffic plus lack of regulatory credentials result in Forbes discounting this firm’s volume by 95% to $702 million.

As discussed above, BTC/USD and BTC/USDT are by far the biggest spot pairs for bitcoin, but there are a few other pairs worth mentioning. The next largest are BTC-KWR, BTC-JPY, BTC-USDC, and BTC-EUR. An exchange’s decision to offer base assets across bitcoin, especially when it comes to fiat, usually comes down to the local fiat currency used by an exchange’s client base. Each of the companies trading bitcoin against the won or yen are based in South Korea or Japan respectively.

USDC, by nature of its blockchain-based DNA, is easier to cross national-boundaries. Readers may notice that Kraken, Binance or Coinbase are not based in Europe, though they each have a series of licenses to operate in certain countries. They each offer euro trading as a way to onboard new users, but unlike the South Korea or Japan-based exchanges, the euro is not their most dominant base asset for trading.

However, while eight pairs by volume garner the majority of bitcoin volume, there are dozens of other varieties trading at obscure exchanges uncounted even in our present study. For example, it is difficult to find the amount of BTC-NGN (Nigerian naira) volume traded in Nigeria because crypto data firms like Nomics, CoinMarketCap and CoinGecko generally do not track it.

One can safely assume that local crypto exchanges not widely known outside of Nigeria capture most BTC-NGN liquidity, which is likely true for many other exchanges operating in emerging markets.

These observations are largely true when it comes to perpetual futures as well. However, the won and the yen do not appear to have gained significant market share in this area.Finally, when it comes to the traditional futures markets, such as those that offer regular monthly expirations, the only two pairs that seem to matter are BTC-USD and BTC-USDT.

Bitcoin may just be the beginning of the problem. If reported trading volumes for bitcoin, the most regulated and closely-watched crypto asset around the world, are untrustworthy, then metrics for even smaller assets should be taken with even greater grains of salt. At its best, trading volume is one of the most measurable signs of investor interest, but it can be easily manipulated to convince novice investors that it has much more demand than it actually does.

Binance remains the 800-lb elephant in the room. Even after a 45% discount on its volume, Binance still generates the equivalent of 27.3% of all “real” trading volume. There is no other crypto exchange that can match its market power, and it’s been that way for the past two years. That said, while Binance has been saying all of the right things about cooperating with regulators – it has started getting licenses around the world and is promising to announce a global headquarters – questions remain about its operational controls. Unless regulators can get comfortable with Binance’s legitimacy, it may be difficult to envision a spot ETF getting approved anytime soon.

Tether remains “Too Big To Fail” – for now: This study invites more questions about the true use and value of two of the largest stablecoins – USDT and BUSD. Say what you will about Tether, and people have, it has found product-market fit in a big way. But that is the exact problem in the minds of many so-called Tether Truthers, who do not believe that the $68 billion is actually backed by reserves. It is hard to imagine what would happen to markets if traders stopped trusting tether – and to be fair there is little evidence that this is happening – and none of its competitors were willing to take its place.

Areas For Future Study

The role of stablecoins in market manipulation. We did not see any evidence that tether-based trading pairs were any more prone to fraud than other assets. However, this area is worth looking into further, especially if tether begins to deviate again from its $1 peg or other algorithmic stablecoins begin to gain traction in large spot-market trading. An ostensibly stable base asset that has higher-than-expected volatility can always lead to both legitimate arbitrage opportunities as well as openings for fraud.

The potential of perpetual futures to be manipulated. Through our research, including first-person interviews with direct market participants, we did not see any evidence that perpetual futures are more prone to wash trading and other forms of manipulation than conventional futures or spot contracts. However, given the relatively novel nature of this product (it was created in 2016), as well as its dominance in crypto trading, it is well worth deeper study.

The future of DEXS in market manipulation. This report did not focus on decentralized exchanges (DEXs), in large part due to the fact that they are not major players in bitcoin trading. To the contrary, when it comes to spot markets most of the major players have separated themselves from the major centralized exchanges by specializing in novel ways to provide liquidity in long-tail assets that are not financially worthwhile for many traditional exchanges to offer.

That said, the market share of DEXs has slowly been creeping up to that of spot–there are even days where Uniswap, the largest DEX, has more trading volume than Coinbase.The Forbes methodology for discounting bitcoin trading volume follows a series of steps.

Regulation. We identify crypto licenses and from what regulatory body that each exchange possesses and use that as proxy to gauge their level of sophistication and intent to deter wash trades and publishing fake volume.

Third-party input. We considered the work of select third parties such as volume data from CoinMarketCap, CoinGecko, Nomics and Messari. Messari’s volume statistics are less extensive by pairs, and it has fewer exchanges than its peers, but it has its own real-volume calculations. Forbes tracked in recent months how Messari applied a volume discount ranging from 40% to 65% to Binance volume, compared with the averages reported by CoinMarketCap, CoinGecko and Nomics at the time.

Messari also discounts the trading volume of FTX by a lesser percentage (less than 20%) and that of Kraken by 99%. With regards to this latter, Forbes doesn’t share the view of applying a heavy discount to a firm that is among the most regulated crypto exchanges in the world. Most exchanges going through the Messari real volume analysis, however, lack any type of volume discount.

Web traffic. Forbes employs third-party data from web analytics firm SimilarWeb to heavily discount the volume of firms claiming a high trading volume without having sufficient crypto licenses and web traffic to generate such volume.

Forbes interviews. Forbes has conducted dozens of interviews of senior executives at major crypto exchanges to supplement quantitative information on a firm’s profile.

I write about digital assets trends and am a leading creator of the Forbes Digital Assets tools and functionality our viewers require. I support the generation of relevant, curated investor

Source: More Than Half Of All Bitcoin Trades Are Fake

Related contents:

Over 50% of all Bitcoin trades on exchanges are fake, new analysis reveals Finance in Bold

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Crypto Winter Watch: All The Big Layoffs, Record Withdrawals And Bankruptcies Sparked By The $2 Trillion Crash

Fears of global recession and the worst inflation in more than 40 years have wreaked havoc on the nascent cryptocurrency market this year—unleashing a fierce crypto winter that’s forced once high-flying firms into bankruptcy and pushed investors into panic-selling mode. The turmoil has already claimed trillions of dollars in market value, billions of dollars in frozen funds and thousands of jobs, but current casualties may only mark the beginning of the storm.

“There will be others that come forward with trouble—I don’t think it ends here,” Marcus Sotiriou, an analyst at London digital asset brokerage GlobalBlock, tells Forbes, noting that close to a dozen firms—including Peter Thiel-backed Vauld—face an uncertain fate after locking customers out of their funds or initiating restructuring proceedings over the past month. “It’s going to be a sustained period of pain,” he says.

It’s anyone’s guess whether the current crypto bear market will ultimately rival the years-long crypto winters of 2014 and 2018—the latter wiping 80% from bitcoin’s price while crushing hundreds of then buzzy new tokens. Sotiriou posits this downturn could last up to 12 months unless persistent inflation soon cools down, allowing the Federal Reserve to ease up on aggressive interest rate hikes that make risky assets less attractive to investors. Analysts aren’t so sure that will happen.

“This is necessary for any financial market to mature and evolve,” argues Matteo Dante Perruccio, a partner at crypto investment firm Wave Financial who envisions that cryptocurrency prices will take at least six months—and up to two years—before recovering, similar to cycles past. “But this time, there’s a difference,” he adds, pointing to a wave of institutional money—from the likes of Tesla, Goldman Sachs, Morgan Stanley and more—that fueled widespread adoption during the pandemic:

“When we inevitably come back into an appreciating market, it’s going to be more sustained and healthier, with less speculation and more tried and true investment philosophy.”As crypto investors wait for brighter days ahead, Forbes is tracking all the carnage from the latest crypto winter, including layoffs, price plunges and record selling—as well as the lifelines and acquisitions that may help cushion the blow. Here’s the damage, so far:

Trillions In Value Erased

Low interest rates and government stimulus measures fueled skyrocketing cryptocurrency prices during the pandemic, but the Federal Reserve’s decision to curb rising inflation by hiking interest rates has since battered investor sentiment—ushering in some of the crypto market’s biggest losses in history. After amassing a record value above $3 trillion in November 2021, the cryptocurrency market posted its worst first half ever and has plummeted to about $950 billion, a nearly 60% drop this year, according to CoinGecko.

Piling on to bearish sentiment, Terra’s luna token, a once top cryptocurrency worth more than $40 billion, lost virtually all its value within a week in May after sister token TerraUSD, a stablecoin meant to hold a price of $1, broke its dollar peg as markets collapsed. Meanwhile, top cryptocurrencies bitcoin, ether and BNB have plunged 70%, 75% and 65% from record highs, respectively. It’s taken the market years to recover from similar declines: When growing regulation sparked a fierce crypto winter beginning in 2017, it took more than 1,000 days for the world’s largest cryptocurrency to nab a new high.

Thousands Laid Off

Faced with steep market declines, cryptocurrency companies have laid off more than 2,000 workers in less than five weeks. By far the biggest blow, popular brokerage Coinbase laid off 1,180 employees, or about 18% of its workforce, on June 14—weeks after the firm’s billionaire CEO, Brian Armstrong, warned investors that a potential recession could lead to a prolonged bear market for cryptocurrencies. In a note announcing the layoffs, Armstrong said he was planning “for the worst” and acknowledged the firm “grew too quickly” during the pandemic bull market.

“It was surprising, and it was hard,” one former employee posted on LinkedIn. Others described the cuts as “abrupt” and “sudden.” Also in June, Gemini, the exchange founded by the billionaire Winklevii twins, said it would cut about 10% of its 1,000 employees, and exchanges Crypto.com and BlockFi said they would terminate 5% and 20% of their workforces, affecting some 260 and 170 employees, respectively. Since then, lending platform Celsius reportedly laid off 150 workers, and Austrian trading platform Bitpanda cut 270 jobs, calling the move “necessary . . . to navigate the storm and get out of it financially healthy.”

Record Selling

Investors piled out of cryptocurrency investment funds at a record pace as bitcoin plunged to an 18-month low last month. Outflows totaled $423 million in the week of June 17, virtually erasing all inflows this year and eclipsing the prior record of $198 million from January, according to crypto asset management firm CoinShares. The turbulence pushed the assets under management of crypto investment products to a record-low $21.6 billion last month, down 37% from May, as “looming liquidation threats” fueled “panic” among investors after Luna’s crash, CryptoCompare analysts wrote in a report.

Meanwhile, Bank of America reports the number of its customers using cryptocurrency tumbled more than 50% to fewer than 500,000 since the market’s highs in November. Even bullish crypto firms have had to reckon with the changing market. On Tuesday, top miner Core Scientific revealed it sold a majority of its bitcoin pile at an average cost of $23,000 last month, raising more than $167 million. In a statement, CEO Mike Levitt attributed the sales to “tremendous stress” driven by weak markets, higher interest rates and “historic inflation.”

Canada-based Bitfarms, which made headlines in January by joining Tesla and former billionaire Michael Saylor’s MicroStrategy in buying bitcoin for its balance sheet, also offloaded a large sum, dumping 3,000 bitcoins, or nearly half its pile, for $62 milion late last month. “It’s typical behavior for bitcoin miners to sell during the final stages of a bear market,” explains Sotiriou, noting some firms may need to shore up funds to cover expenses or stay solvent as high inflation tacks on to operating costs.

Billions In Frozen Cash

Citing “extreme market conditions,” crypto lender Celsius became the first major platform to pause withdrawals and transfers between customer accounts on June 13. Within days, others followed suit: Babel Finance, CoinFLEX and Voyager all froze withdrawals. None have re-enabled access, thus making billions of dollars in funds inaccessible to their investors.

“They’re in a really sticky situation because they’ve been irresponsible with clients’ funds, somehow lost out and are now unable to pay back their clients—and there’s no guarantee they’ll pay the money back,” explains Sotiriou. In its most recent quarterly filing, publicly traded Coinbase warned of the risk, disclosing customers would be treated as “unsecured creditors,” or lenders without collateral to fall back on, in the event the company goes bankrupt.

Bankruptcies And Liquidations

A handful of crypto firms are simply collapsing. On June 27, Voyager issued a notice of default to beleaguered Singapore-based crypto hedge fund Three Arrows Capital (3AC) for failing to make payments on $675 million in bitcoin and stablecoin loans. 3AC at one point managed some $3 billion, but Singapore financial regulators condemned the firm late last month, saying it provided false information and only had the authority to manage up to $250 million.

On top of that, 3AC’s troubles were exacerbated by the sell-off’s impact on its risky investments, which reportedly included overleveraged bets on the Grayscale Bitcoin Trust and about $200 million in now-worthless Luna. On Friday, a British Virgin Islands court reportedly ordered 3AC to liquidate its assets, deeming the firm insolvent; it filed for bankruptcy the same day.

With 3AC’s fate sealed, Voyager itself filed for bankruptcy on Wednesday—a mere five days after it suspended trading. “While I strongly believe in this future, the prolonged volatility and contagion in the crypto markets require us to take deliberate and decisive action now,” Voyager CEO Stephen Ehrlich said in a statement. In a court filing, the firm disclosed that it had more than 100,000 creditors and up to $10 billion in assets. Vauld and Celsius have also announced they’re exploring restructuring options.

Lifelines And War Chests

Some crypto companies are hoping to be rescued before being forced to shut their doors by turning to more stable counterparts. On Friday, FTX, the exchange founded by billionaire Sam Bankman-Fried, entered into an agreement to buy embattled BlockFi for as much as $240 million. “You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers,” he told Forbes last month after providing BlockFi and Voyager with $750 million in credit lines between FTX and his quantitative trading firm Alameda.

More recently, he has said FTX has a “few billion” more to help struggling companies. Meanwhile, Goldman Sachs is reportedly looking to raise $2 billion to help buy up distressed assets from Celsius, and other legacy institutions are also showing interest. “I have this knee-jerk reaction that if you believe that the fundamentals of a long-term case are really strong, when everybody else is dipping, that’s the time to double down,”

Fidelity CEO Abby Johnson, who this year shepherded the firm’s industry-first decision to allow bitcoin in 401(k) plans, said last month when asked about what could be her third crypto winter. “That’s usually the right move.” “It’s incredibly encouraging,” says Dante Perrucio. “Big institutions looking for distressed crypto assets means they believe that the industry is going to come back—and come back strong—despite this very complicated period we’re all in.”

I’m a senior reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism …

Source: Crypto Winter Watch: All The Big Layoffs, Record Withdrawals And Bankruptcies Sparked By The $2 Trillion Crash

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Bankman-Fried Warns: Some Crypto Exchanges Already “Secretly Insolvent”

fter throwing lifelines to troubled digital currency platforms BlockFi and Voyager Digital, Sam Bankman-Fried, the 30-year-old billionaire founder of FTX, warns that some crypto exchanges will soon fail. The question on everybody’s mind in the crypto world is whether we’ve reached the market bottom. Nearly $2 trillion in crypto market value has evaporated since November.

Two bellwether digital assets Luna, a $40 billion crypto asset associated with TerraUSD, a $16 billion stablecoin designed to maintain parity with the U.S. dollar, have collapsed. Earlier this month bitcoin traded for below $20,000, its lowest level since December 2020. But the fallout is far from complete. Earlier this month, Singapore-based Three Arrows Capital (3AC), a highly levered crypto trading firm with $200 million of exposure to Luna revealed that it was nearly insolvent.

Three Arrows’ had borrowed large sums from numerous crypto firms including New Jersey’s Voyager Digital and New York-based BlockFi. In order to survive Three Arrows default, the two digital asset exchanges turned to billionaire Sam Bankman-Fried, founder of FTX and the richest person in crypto, worth some $20.5 billion. Between FTX and his quantitative trading firm Alameda, he provided the companies with $750 million in credit lines.

There is no guarantee that Bankman-Fried will recoup his investment. “You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things and protect customers,” he says. We’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilize things.”

Bankman-Fried’s cash infusions are far from altruistic. He has emerged as a smart vulture capitalist in the beleaguered crypto market, knowing full well that his own fortune depends on its healthy rebound and growth. Bankman-Fried has also bought into crypto brokerage Robinhood, where FTX has already accumulated a 7.6% stake, and is rumored to be considering an acquisition.

Bankman-Fried denies any active merger talks with Robinhood but tells Forbes that more crypto exchange failures are coming. “There are some third-tier exchanges that are already secretly insolvent,” says Bankman-Fried. Fried’s FTX, along with Coinbase, Kraken and Binance, are giants among digital asset exchanges. They have millions of customer accounts and functionally they operate similarly to online stock brokerages. But outside of these whales, there are more than 600 crypto exchanges around the world operating in a largely unregulated frontier.

Never heard of AAX, Billance and Hotbit? You aren’t alone, but like Coinbase they trade bitcoin, ether and dogecoin and offer generous margin loans–as much 20 times their initial capital— to their clients. Lacking any meaningful regulatory oversight many crypto exchanges have been vulnerable to scammers and hacks.

Japanese exchange Coincheck was hacked for $530 million in crypto in 2018, Singaporean exchange KuCoin lost $275 million in 2020, and then in December 2021 Cayman Island-based Bitmart was breached for $200 million. Back in 2016, Bitifinex was hacked to the tune of nearly 120,000 bitcoin worth $2.5 billion now.

But, despite the generous bailouts, not even Bankman-Fried is able, or willing, to throw good money after bad in perpetuity. “There are companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues, or that there is not much of a business left to be saved,” says Bankman-Fried, who declined to name any specific crypto exchanges.

As Forbes reported in its analysis of the world’s best 60 crypto exchanges, the digital asset exchange business generally lacks standards to certify a new entity before or after they start soliciting client funds. The SEC doesn’t regulate the exchanges and the Commodities Futures and Trading Commission has oversight of only a handful of crypto derivatives markets. In the United States there is no member organization like FINRA to self- regulate crypto exchanges.

Bankman-Fried is worried about continued failures because during the euphoria of rising crypto prices, exchanges kept upping the ante to attract customers with generous yields for deposits. BlockFi or Voyager were promising yield payments to customers, upwards of 12% per year that had to be paid for either by charging at least that much more interest to borrowers or more likely, by putting that money to work in decentralized finance DeFi applications.

That worked fine when crypto was going nowhere but up. It looks disastrous now. “There are companies that are basically too far gone and it’s not practical to backstop them.”

Like J.P. Morgan during the stock market panic and crash of 1907, Bankman-Fried is taking advantage of the crypto chaos to expand his empire. He recently closed the acquisition of Liquid, a troubled Japanese exchange. BlockFi and Voyager Digital are in his grip and despite his denials, Robinhood may be next. According to sources familiar with his loans to Voyager, Alameda is likely to lose at least $70 million of the credit it has already extended. In 2021, publicly-traded Voyager’s Digital had a market value of more than $3 billion.

Today it shares trade for pennies and its market cap of $62 million points to an imminent bankruptcy filing. Despite the carnage, Bankman-Fried tells Forbes that FTX remains profitable and has been for the past 10 quarters. FTX’s biggest rival Coinbase lost $432 million in the first quarter of 2022 and its stock is down almost 90% from its all-time high.

Bankman-Fried also has his eye on crypto miners, many of whom leveraged their balance sheet at breakneck pace to quickly scale and take advantage of this 21st century digital gold rush. The stocks of publicly-trading crypto miners including Marathon Digital Holdings and Riot Blockchain are down more than 60% year to date.

One bellwether crypto asset Bankman-Fried is not worried about is Tether, world’s largest dollar-pegged stablecoin with a market cap exceeding $70 billion. Many industry watchers have deemed it a ticking time bomb with questionable collateral whose failure would almost certainly be an existential threat to the entire cryptocurrency market. Tested during the Luna collapse Tether briefly lost its $1 peg and fell to a price 95 cents. However, it successfully processed over $10 billion worth of withdrawals and has since recovered.

Says Bankman-Fried, “I think that the really bearish views on Tether are wrong…I don’t think there is any evidence to support them.”

Steven Ehrlich

I am director of research for digital assets at Forbes. I was recently at Kraken, a cryptocurrency exchange based in the United States.

Source: Bankman-Fried Warns: Some Crypto Exchanges Already “Secretly Insolvent”

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