In this tumultuous period for cryptocurrencies, low quality altcoins refuse to die, bitcoin bull traps and price manipulations keep on happening, and Coincheck hackers continue to launder their remaining NEM.

Another bull Trap

Anyone paying attention to the markets is becoming all too familiar with these “incidental” bull-bear patterns. One can reasonably expect that after lounging around the $6.7k region for days, bitcoin will break out, soaring above $7k and seeding hope that a recovery could finally be on the horizon. Then, almost as quickly as that elusive green candle materialises, everything turns to that dreary red and plummets back to where it started, ready to restart the breakout/fakeout sequence all over again.

When the altcoins plummeted dramatically in mid-January, one upside was said to be that the vaporware projects – also known as “shitcoins” – would be left behind. But as Onchainfx comments, tron and verge have maintained their presence, with the latter even outperforming bitcoin thanks to verge’s “big partnership” that is expected to be announced on April 16. If you’re expecting any semblance of quality from these revelations, don’t hold your breath.

Price manipulation plagues the crypto space

There are of course incentives for exchanges to do this, namely the consistently declining trade volumes, which leads to lower fee revenue and therefore incentivises price manipulations in order to retain revenue via liquidation instead of trading fees.

In this unregulated market, both longs and shorts – which are bets on the price moving up or down – have a “liquidation price”, at which they get liquidated (traded for fiat) by the exchange to rake in the profits at the expense of their users. In effect, a trading platform that engages in such activity gets the entire stack they bet on, while also extracting a high market fee multiplied by the leverage. Since these exchanges know the exact characteristics of their outstanding shorts/longs, and since volume is low after these pumps or dumps (which translates to sideways trading), big trading platforms can engineer movements in the market price and generate income through planned liquidation.

When the market experiences lots of overleveraged shorts (debt-funded short investments), an exchange can briefly pump the price – possibly by using bots - and subsequently collect all the short positions. The same thing can be done with overleveraged longs, but instead through a burst of selling pressure.

This observation is further instantiated when we look at the record number of margin and leverage trading, and a clear domination of the market by Bitmex – an unregulated exchange.

The image below illustrates this perfectly, where $1,000 buy orders literally appear out of nowhere, only to resume sideways trading in the red on abysmal volume.

Coincheck hackers launder the remaining NEM

Deepdotweb has reported that Coincheck’s hackers have finally laundered the last of their NEM on the deep web. They’re believed to have raised over $100 million for their stolen coins, which could have been bought for LTC or BTC at a discounted price. In a way, it’s quite ironic that the attackers set up their very own crypto exchange to sell coins they had just stolen from Japan’s Coincheck exchange. As per their illicit activities, the next logical step would be to cash out their laundered booty through Litecoin and bitcoin payments, which shouldn’t be too much trouble in comparison to the heated NEM.

Mining pool centralisation is inevitable

The same way it was inevitable that exchanges would seek to replicate last December and January’s market conditions, so too was it unavoidable that mining centralisation would become a reality. According to Nic Carter, who runs the crypto asset rankings site Onchainfx, The Palmer Principle, which is the notion that “no matter the consensus mechanism, 51% of stake/mining power will be owned by at most 3 entities,” is inevitable.

It’s safe to say that regulation will eventually catch up to these illegitimate practices, but this goes to show how volatility in a young market is to be expected, and that regulation of one form or another is both inevitable and desirable in any developing market.