Bitcoin’s Black Swan: What Happens If The CFTC Targets Tether Next?

The unthinkable just happened: Bitcoin derivatives trading platform BitMEX is being targeted by the CFTC for a variety of charges, and…

The unthinkable just happened: Bitcoin derivatives trading platform BitMEX is being targeted by the CFTC for a variety of charges, and the company’s CTO has already been arrested related to the case. Now, the worst possible scenario could be on the horizon: The United States regulator could target Tether and parent company Bitfinex next.

Here’s how this black swan event could play out, and how it could be devastating to the entire fabric of the cryptocurrency if this happens.

Crypto Industry Giants Feel The Pressure Following CFTC Taking On BitMEX

The cryptocurrency market is currently experiencing a moment of uncertainty that surprisingly Bitcoin has held up well from. The most dominant derivatives trading platform over the last several years, BitMEX, was just slapped by the CFTC and US Department of Justice with a slew of charges.

Bitcoin price fell as a result of the negative news but has been keeping its head above $10,500 so far. Regardless of how the crypto asset’s price is holding up, sentiment isn’t doing as well.

Related Reading | $10K Bitcoin Shows Resiliency Facing BitMex Drama, KuCoin Hack, And Now This

Cryptocurrency valuations are driven by speculation primarily, and after the news broke, market participants took to Twitter to do what they love to do the most: speculate.

A wide variety of conclusions have been drawn, such as “institutional racism,” “Bitcoin is dead,” and a number of other pessimistic outcomes. But there’s one scenario that could be especially bad for the entire cryptocurrency market.

BTCUSD Weekly What Happens If The Growing Tether Supply Takes Down Bitcoin? | Source: TradingView

Could Tether and Bitfinex Trigger A Black Swan In Bitcoin?

The two United States entities targeting BitMEX, also have had their sights set on Tether and by relation, Bitfinex. The two businesses share a parent company and several other ties.

While the token itself is a stablecoin tied one to one with the dollar, its existence has been anything but stable.

Fears of Tether being insolvent in part drove Bitcoin down to its bear market bottom of $3,200. Tether, which trades under the USDT ticker, was also central to a CFTC investigation involving Bitcoin price manipulation.

Related Reading | How Does The Next Chapter In The Tether Printing Story Unfold For Bitcoin

Back then, however, Tether’s market cap was just $2 billion. Today, it’s over $15 billion, and therefore significantly more integral to the overall cryptocurrency landscape.

USDT is also now the base trading pair on several top cryptocurrency exchanges. A total collapse of Tether could result in a total collapse in the greater crypto market, and Bitcoin especially.

The more Tether is printed, the more analysts expect Bitcoin price to rise. But what if all that Tether is suddenly at risk of being worthless, or if the parent company is targeted further by the CFTC and the DoJ, much like BitMEX just did?

Featured image from Deposit Photos, Charts from TradingView

Analyst: Chainlink Likely to Face Grim Downturn That Leads to $6.85

Chainlink’s price action has been overtly bearish as of late, with the cryptocurrency being unable to hold above $10.00 despite the…

Chainlink’s price action has been overtly bearish as of late, with the cryptocurrency being unable to hold above $10.00 despite the technical strength resulting from its recent rebound from the $7.00 region.

It seems that the “v-shaped recovery” it posted from these lows was not enough to alter its near-term outlook, as it now appears to be at risk of seeing further downside.

This weakness has come about as a result of turbulence within the rest of the crypto market.

Bitcoin’s price has faced heightened sell-side pressure due to revelations regarding the CFTC’s charges against the BitMEX owners, as well as turbulence within the stock market.

This has not boded well for altcoins, with many posting massive losses as investors flee away from “beta assets” in search of lower-risk assets like Bitcoin and stablecoins.

While looking towards Chainlink’s price action, one analyst explained that he is looking for a move down to the cryptocurrency’s August open and August low. This means that it could soon plunge significantly lower in the days and weeks ahead.

Chainlink Declines Below $10.00 as Selling Pressure Mounts

At the time of writing, Chainlink is trading down 4% at its current price of $9.22. This marks a notable decline from its recent highs of $10.50 set just before the recent selloff.

The cryptocurrency’s price action has been weak, to say the least, ever since it declined from its multi-month highs of $20.00.

The intensity of this selloff has been rather extreme, and it does seem as though it struck a serious blow to its underlying strength.

$10.00 has been a pivotal level for LINK, although bulls have so far been unable to secure a strong positioning above this level.

Analyst: LINK Could Soon Plunge Towards $6.85

While speaking about where he expects Chainlink to trend next, one analyst stated that he is looking for a move down towards the cryptocurrency’s August low under $7.00.

“LINK update. Probably get a bounce here at ‘July high’. Once we can clear this level, i’ll tighten stops and look to add more targeting ‘August open’ and then ‘August low.’”

Image Courtesy of TraderSZ. Chart via TradingView.

Where the market trends next will likely determine the fate of Chainlink, but it remains unclear as to whether or not it will be able to garner enough independent momentum to break its downtrend.

Featured image from Unsplash. Charts from TradingView.

U.S. Authorities Accused of Stunning Hypocrisy Over BitMEX Charges

The U.S. Commodities and Futures Commission (CFTC), in conjunction with the Federal Bureau of Investigation (FBI), has charged BitMEX with failure…

The U.S. Commodities and Futures Commission (CFTC), in conjunction with the Federal Bureau of Investigation (FBI), has charged BitMEX with failure to prevent money laundering, as well as running an illicit derivatives trading platform.

Each of the two charges carries a maximum penalty of five years in prison for the accused.

In connection with the charges, the United States Office of the Southern District of New York has indicted four individuals. Those being Arthur Hayes, Ben Delo, Samuel Reed, and Gregory Dwyer.

Yesterday morning saw the arrest of BitMEX CTO, Samuel Reed in Massachusetts. The others “remain at large”.

However, U.S. authorities believe both Hayes and Delo are in Hong Kong. Whereas Dwyer could be in Australia or Bermuda.

Speaking on the case, FBI Assistant Director William F. Sweeney Jr. gave a scathing account of what investigators turned up.

Sweeney Jr. said the accused had willfully violated the Bank Secrecy Act and evaded U.S. anti-money laundering requirements. What’s more, he said one of the accused had bragged about bribing regulators in the Seychelles, where BitMEX is incorporated, for the cost of “a coconut.”

“Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time.”

BitMEX Responds to the Allegations

In response, BitMEX released a statement refuting the charges. They claim that any alleged violation of law was the result of a lack of clarity on the part of regulators.

“We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously. From our early days as a start-up, we have always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance.”

BitMEX is still open for trading. The firm also sought to assure users by saying deposits are safe.

However, today has seen BitMEX users clamoring to withdraw their funds. So far, outflows from the exchange are close to 25k Bitcoin.

J.P. Morgan Market Manipulation Results in Fines For The Bank

On charges of manipulating the precious metals markets, J.P. Morgan has agreed to pay $920 million to settle with U.S. regulators.

The firm admitted “spoofing” between 2009 and 2016 in order to influence the market in their favor.

Rather than systemic corruption, Daniel Pinto, the bank’s COO, put this down to the actions of individual traders, who have since moved on.

“The conduct of the individuals referenced in today’s resolutions is unacceptable and they are no longer with the firm.”

However, as pointed out by @TheCryptoLark, the crimes of J.P. Morgan did not result in prison time for CEO Jamie Dimon. This, he believes, is an example of bias towards the big banks.

The J.P Morgan spoofing case comes off the back of last month’s U.S. government leak in which the firm was also accused of money laundering.

According to the BBC, a consortium of big banks washed $2 trillion of dirty money from the proceeds of drugs, terrorism, and corruption. This continued to happen even after being warned by U.S. officials.

The list of banks involved includes J.P. Morgan, HSBC, Standard Chartered, Deutsche Bank, and Bank of New York Mellon.

Yesterday, the price of Bitcoin closed down 2% on news of the BitMEX charges. Today sees a continuation of the downtrend. Currently, the price of BTC is $10,458.

Bitcoin daily chart YTD with volume. (Source: tradingview.com)

Buy Bitcoin and Ethereum, Asserts Industry Exec After BitMEX-Led Crash

Crypto derivative platform BitMEX’s struggle with the American authorities took a toll on Bitcoin and Ethereum markets. The US Commodity Futures…

Crypto derivative platform BitMEX’s struggle with the American authorities took a toll on Bitcoin and Ethereum markets.

The US Commodity Futures Trading Commission on Thursday filed criminal charges against the owners of BitMEX, accusing them of facilitating money laundering and other illegal financial transactions. The news prompted derivative traders to withdraw more than $25 million worth of Bitcoin from their accounts on BitMEX.

At the same time, the open interest in the Seychelles-based exchange also dropped significantly, with Bitcoin and Ethereum contracts reporting $100 million and $424 million liquidations, respectively, as of this Friday morning session.

Ethereum Futures and Swap OI on BitMEX. Source: CoinMarketCap

The liquidations followed a dramatic drop in the prices of both Bitcoin and Ethereum. BTC/USD on Friday fell to a multi-week low near $10,363 in a 4.46 percent sell-off. On the other hand, ETH/USD posted more losses by dropping 9.5 percent from its Thursday’s peak.

Buy the Bitcoin Dip

Simon Dedic, the co-founder of crypto-focused research firm Blockfyre, said that both Bitcoin and Ethereum fell because of negative media coverage concerning BitMEX. He noted that the assets have a strong likelihood of retaining their bullish bias as long as “smart people” buy the dip.

“Once you understand media is nothing but a powerful market manipulator, you can start counter trading it,” said Mr. Dedic. “Non-reflecting people panic dump with fear radiating news, smart people make bank on it. Buying every dip of BTC & ETH, FA hasn’t changed.”

With FA, Mr. Dedic was referring to the cryptocurrencies’ long-term fundamental aspects. Both Bitcoin and Ethereum surged higher this year after taking cues from global central banks’ expansionary monetary policies. The Federal Reserve, in particular, fueled the crypto rally by announcing ultralow interest rates and infinite bond-buying programs.

Ethereum-Bitcoin price moves against the global monetary expansionary outlook. Source: TradingView.com

Ethereum, meanwhile, outpaced the Bitcoin price rally because of its association with the emerging decentralized finance industry. As a blockchain project, Ethereum supports a majority of DeFi and stablecoin projects on its public ledger.

Upside Intact

A common perception across the crypto market rubbished the recent sell for its ability to mature into a long-term bearish trend. Like Mr. Dedic, other observers noted that Bitcoin and Ethereum could surge higher despite the latest setback.

“Any upside on bitcoin will get sold into until sub 10k,” said a pseudonymous trader. “The only invalidation is a clean break back above the Monthly open ~ 10.8k Higher timeframe I’m stupid bullish and dips into 8-9k I’ll be a big buyer.”

Ethereum’s positive correlation with Bitcoin also ensured a similar upside outcome for ETH/USD.

Traders Flock to LEND Ahead of Its 100:1 Split to AAVE: Price Up 20%

Demand for LEND has surged dramatically over the last week as the token undergoes a rebranding. Aave, the non-custodial “DeFi” protocol,…

Demand for LEND has surged dramatically over the last week as the token undergoes a rebranding.

Aave, the non-custodial “DeFi” protocol, earlier launched its Aave Improvement Proposal (AIP1) to allow community consent over the migration from its governance token LEND to its rebranded avatar AAVE. In retrospect, the switchover attempted to take people’s opinions on the new changes proposed to Aave’s protocol existing economic model.

The modification introduced new Safety Incentives that would enable users to earn income by staking AAVE tokens in a reserve via “Safety Module.” For that, users would need to give up their LEND holdings. They will receive AAVE tokens instead at an exchange rate of 100 LEND per AAVE.

Aave Safety Module flowchart
Aave Safety Module flowchart

The proposal also promised an additional 400 AAVE in rewards every day when taking the 100 LEND > 1 AAVE swap into account.

“AAVE holders will be incentivized to backstop the protocol from shortfall by staking to the Safety Module,” explained Matt Kaye, the managing partner at Blockhead Capital in California. “The SM includes a builtin backstop mechanism to prevent the excess flow of AAVE into the open market as not to increase AAVE sell pressure.”

The AIP1 went through unharmed on Thursday with the majority “YAE.” The team announced that it would release more information about the migration on Friday.

LEND Surges

Meanwhile, the LEND/USD exchange rate jumped by 8.79 percent in the last 24 hours due to the migration hype. That brought the pair’s total rebound up by almost 20 percent, with a session high near $0.6.

LEND performance amid the protocol upgrade hype. Source: TradingView.com
LEND performance amid the protocol upgrade hype. Source: TradingView.com

The surge appeared to have come from traders’ inclination to hold AAVE. At first, it has to do with the rewards. At the same time, AIP1’s commitment to add adds a 3M token Aave Reserve to a community governed treasury further increased the appeal of LEND among serious stakers.

LEND could surge towards its 50-day moving average (red) as it keeps up with the token migration hype. A successful breakout, on the other hand, would confirm $0.65 as its next upside target.

“A consolidation phase,” said an analyst, “will produce several strong entry opportunities in the coming weeks, possibly months, before LEND gets going on its next leg up.”

He said the LEND/USD could surge another 20,000 again on Aave’s credibility as an emerging decentralized finance project.

Hoskinson: Partnership With SingularityNET is a Chance For Cardano to Become The Best

AI firm SingularityNET today announced a partnership deal with Cardano. Previously, SingularityNET operated exclusively on the Ethereum blockchain. As such, many…

AI firm SingularityNET today announced a partnership deal with Cardano. Previously, SingularityNET operated exclusively on the Ethereum blockchain. As such, many have taken the news as a significant blow for Ethereum stakeholders.

However, SingularityNET CEO Dr. Ben Goertzel said it was always in the plan to make SingularityNET multi-chain. While Ethereum does have scaling and cost issues, Goertzel made it clear that, at this stage, he is still working with both blockchains.

“What I want to do is make SingularityNET platform infrastructure multi-chain. We had that in our minds from the very beginning. Right now it’s all on Ethereum… but it doesn’t all have to be on one blockchain… some of the AGI tokens will remain on Ethereum, and some migrates to Cardano.”

Nonetheless, Goertzel still laid out his expectations for performance and technological development. Meaning, underperformance from either chain would see a migration away from that chain.

“how much remains on Ethereum and how much goes to Cardano, that’s for the community and the market to decide, right? If the Cardano portion works much much better then everything should migrate there. If it turns out the Ethereum portion is more useful for some purposes, then so be it.”

Goertzel’s Vision is to Democratize AI

In the first instance, moving a portion of SingularityNET tokens to Cardano would benefit the firm by way of greater efficiency and cost-savings.

But it’s really the fulfillment of the company’s long term goals that Goertzel is most concerned with.

On that, Goertzel spoke of the synergy between both companies, in that they both strive to operate via formal verification and the scientific method. Going deeper, Goertzel gave a glimpse of his vision by describing an automated reasoning system running on Cardano.

“I would love to see automated theorum provers running in SingularityNET, and leveraging the SingularityNET decentralized AI network. I’d love to see these decentralized AI-based automated theorum provers put to work, verifying smart contracts running on Cardano and verifying Cardano infrastructure code.”

However, the ultimate goal is to develop artificial general intelligence (AGI), capable of understanding and learning, that runs on a decentralized global network.

This is in stark contrast to big tech’s vision, which is centralized and infers a societal control element via the involvement of alphabet agencies.

Instead, Goertzel believes AI should be peer-to-peer. He sees individual developers and small groups creating cooperative AI agents to serve users.

Technical Demands of SingularityNET Will Drive Cardano Development

In response, Hoskinson said it’s the needs of the partnering firms that will help to shape the Cardano ecosystem.

“We look to our partners and say, well what do you guys need? Where do you want to go? What type of marketplaces do you want to be involved in? And how can we help build this technology together, and make that consumable infrastructure grow with you?”

All the same, Hoskinson is cognizant of the difficulties, both business and technical, in bringing Goertzel’s vision to life.

The challenge is difficult. But Hoskinson states that it’s exactly these types of demands that will drive Cardano to be better than the rest.

Cardano daily chart YTD with volume. (Source: tradingview.com)