Since the blockchain technology of Bitcoin was introduced, 43 crypto exchanges have failed, possibly more. To accept the overall and generous figure that 300 crypto exchanges (total) have ever existed, means that crypto experiences a 15% exchange failure rate. That’s a lot of failure.
Effectively, the wallets in those exchanges have been lost, too. We can’t equate a 15% exchange failure rate to the same amount of lost bitcoin (BTC being most widely held) because the wallet amounts don’t necessarily equate to the same percentage in bitcoin overall. But, whatever amount of bitcoin has been lost, it has been lost forever — and that’s just one factor driving the BTC mania. Failed exchange bitcoin has been lost due to the nature of bitcoin itself and due to the shady operations of the exchanges. Thus a significant percentage of BTC’s rise is based on bitcoin exchanges failing.
But let’s first consider the allegation that ‘respectable exchange’ Binance — and many others — engage in “wash trading”. Wash trading means market fakery to manipulate price and volume. One chart here is worth one thousand words, where the wash-trading pattern is undeniable. According to the ‘Blockchain Transparency Institute’ or BTI* the issue is so acute, BTI released this statement in April, 2019:
‘Exchanges which are faking their volumes use a variety of different tactics to try and swindle investors. These tactics we have found, which are included in our individual exchange reports, include buying twitter followers and likes, filling up fake order books, mirror wash trading the largest exchanges with real volume, and trying to disguise their wash trading using various bot settings to not affect price. On many of these exchanges trading high volumes, we would close the spread and watch the volume plummet as the bots had no room to wash trade with themselves.
We also dug into many of these exchanges with 99%+ fake volumes and found many share the same trading engine and design. Further exploration into the searches of Fiverr, an online freelancer site, revealed the ability to have a crypto exchange website created for you starting at just $850 to create “an exchange like Binance”, and for just $100 more they will make you your own trading bot to wash trade your way up to the CMC top 10. It is any wonder the many exchanges we found which are 99%+ fake, now outnumber the clean exchanges on CMC, according to our data.’
Failed exchanges, market fakery, and large amounts of BTC lost forever due to seizure, theft, forfeiture — or just plain lost accounts. Wall Street is now interested. That’s because the crypto market is just like Wall Street, it’s crooked and cannot be shorted. (Meaning that the Fed/Treasury have Wall Street’s back versus short sellers).
So why do the disciples of crypto ignore the failed exchange issue? The common response is that the ‘free market’ takes care of itself, where external regulation need not apply. And yet there are some 1500 people at the bottom of the Atlantic who perished on April 14th, 1912, who might beg to differ about regulation if they could speak today. And for sure the exchange free market ideologues did not lose their crypto in any of the forty-three exchanges that failed.
And why why did these crypto exchanges fail? Ironically, some ran out of funds to operate. Some thieved or embezzled their way into customer accounts and got caught. Some were hacked, ie crypto account wallets hacked. Some have ‘key man operations’ where the key man mysteriously disappeared, example Gerald Cotten. Some exchanges are scams, and some get shutdown for no apparent reason at all. Then there are exchanges that don’t fail or shutdown, they simply end withdrawals for a time. That’s what happened with OKEx.
Now, with this history, why are small retail investors being pushed to speculate on bitcoin? As in our previous post Wake Up and Smell the Tulips, do not assume that the highest levels of power are in any way opposed to this technology or bitcoin in particular. Regardless of crypto’s anonymous founding, perhaps by an intelligence service, Bitcoin does provide a repository for very large amounts without ledgers, without taxation, without accountability. In spite of bitcoin’s volatility, that’s compelling.
On December 4th, 2020, BTC traded nearly $3Bn USd in 24 hours being a fairly low-volume day. As such, bitcoin represents a highly liquid fund that can facilitate largely anonymous transactions running the gamut from market trades and money laundering, to running guns and smuggling. There are no currency controls, no exchange rate premiums or penalties, no bank or State accounting ledgers or taxes to be paid or recorded on bitcoin transactions; only the ledger of discrete blockchain transactions exists. Bitcoin risk only equates to stability of the exchange used, and the volatility of BTC itself.
When many of the world’s wealthiest individuals operate in the financial shadows, the opportunity to do dodgy deals with bitcoin is irresistible, and a long-time criminal dream. That includes the Fed/Treasury where it wishes to lose inflationary dollars or hedge their dark pool swaps with an adjunct like Bitcoin.
That the criminals-in-charge would do away with a tool they find so useful for their own purposes – like bitcoin – is unlikely to gain traction. Meanwhile it’s likely inescapable that Bitcoin will end up just like any other mania, from the South Sea affair to the dot com bust. It depends on how long Elites need the dark pool that is bitcoin. We shall see.
*The BTI is interesting because it is unclear who funds it or why, and how it could be a true “industry standard” in a dark ops industry.