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CFTC Widens Cryptocurrency Manipulation Probe, Demands Trading Data from Exchanges

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U.S. regulators have demanded that several cryptocurrency exchanges hand over trading data tied to an ongoing investigation into price manipulation, The Wall Street Journal has learned. The request, which was initiated by the Commodity Futures Trading Commission (CFTC), is part of a six-month probe into whether bitcoin futures contracts are distorting market prices.

Investigation Widens

The price-manipulation probe was launched by CFTC regulators back in December shortly after CBOE and CME introduced the first-ever bitcoin futures contracts. According to WSJ sources, CME asked four exchanges to share trading data following the settlement of its January futures contract. The four exchanges were Bitstamp, Coinbase, itBit and Kraken.

Although the exchanges provided some data, they ultimately refused to grant comprehensive information to CME, which is supposed to monitor trading activity to ensure that individual trades do not skew futures prices. The data that was handed over to CME was limited to a few hours of activity instead of the initial request for a full day.

Frustrated by the dispute, the CFTC subpoenaed the exchanges for the data. It is not entirely clear where the situation stands. However, a spokesperson for CME told WSJ that “all participating exchanges are required to share information, including cooperation with inquiries and investigations.”

Regulatory Spotlight

Cryptocurrency exchange Bitfinex is also facing scrutiny from the CFTC over alleged ties to Tether, the dollar-backed stablecoin that has been unable to prove the extent of its dollar-denominated assets.  Both companies share the same executives, which has prompted an investigation into price manipulation. (Basically, Tether has vastly increased the supply of USDT tokens without providing adequate proof that it holds the same amount of U.S. dollars. Some analysts have claimed that Bitfinex has facilitated this growth, and is largely responsible for bitcoin’s massive price growth since early 2017.)

The CFTC, which considers bitcoin to be a commodity, isn’t the only regulator flexing its investigative powers. The U.S. Securities and Exchange Commission (SEC) has subpoenaed over 80 cryptocurrency firms as part of an ongoing probe into digital assets.

The SEC recently appointed a crypto czar to oversee digital currencies and initial coin offerings (ICOs), a sign that the agency was planning to issue more comprehensive rulings on the subject. Chairman Jay Clayton has strongly implied that all ICOs are securities, which would put them under the purview of the SEC.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 738 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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ETFs

As Race for Bitcoin ETF Heats Up, SEC Identifies Cryptocurrency as a Top Priority in 2019

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The crypto boom of 2017 caught federal regulators by surprise. The subsequent crash of 2018 forced them to closely examine the market, including the sale, trading and management of cryptoassets. Now, the U.S. Securities and Exchange Commission (SEC) is prepared to take a proactive approach to monitoring the nascent asset class at a time when more issuers are throwing their weight behind a crypto-backed exchange-traded fund (ETF).

Crypto Becomes a Priority

In the newly released 2019 Examination Priorities, the SEC’s Office of Compliance Inspections and Examinations (OCIE) has identified cryptocurrencies as one of six regulatory focal points this year. More attention and resources will be directed at the digital asset market due to its its rapid growth and perceived risks to retail investors.

“Given the significant growth and risks presented in this market, OCIE will continue to monitor the offer and sale, trading, and management of digital assets, and where the products are securities, examine for regulatory compliance,” the report said.

The regulator added that it will conduct high-level inquiries on market participants “offering, selling, trading, and managing these products…” Market participants include broker-dealers, trading platforms and investment advisers.

The report was released less than six weeks before the SEC is set to make a decision on a highly regarded bitcoin ETF. Although the agency has rejected more than a dozen crypto ETF applications, a joint proposal put forward by VanEck and SolidX is believed to have the best shot of being approved.

That’s because the proposed product includes safeguards to protect retail investors against fraud and manipulation. It also proposes to hold a repository of physical bitcoin as opposed to futures contracts and other derivative-based products. More on this story can be found here: SEC Delays Decision on VanEck SolidX Bitcoin ETF Until Next Year.

A crypto startup by the name of Bitwise Asset Management has also applied for bitcoin ETF product with the SEC. Like the VanEck-SolidX product, the Bitwise application is attempting to address the myriad of regulatory concerns put forth by the SEC in its previous rulings on crypto-backed ETFs.

If Bitcoin ETF Doesn’t Happen by February, How Will it Affect the Market?

Japan Not Considering Bitcoin ETF: FSA

Reports that Japan was considering approving a bitcoin ETF were quickly shot down this weekend by a spokesperson from the country’s Financial Services Agency (FSA). As Bitcoin.com and CCN report, the FSA representative said, “There is no such fact that we are considering approving ETFs which track crypto-assets at present. We are not currently considering approving them.”

Last week, Bloomberg and several other sources reported that Tokyo’s financial regulators were exploring the possibility of a crypto ETF tied to bitcoin futures. The speculation put the regulator in the same boat as the SEC, which has been reluctant to approve a bitcoin fund but has nevertheless invited public dialogue on the matter.

At present, Japan does not believe there is “constructive and social significant of trading cryptoassets derivatives,” the spokesperson said.

Japan was one of the first countries to approve and regulate cryptocurrency markets, but a series of high-profile attacks on domestic exchanges forced regulators to adopt more stringent measures. Exchanges have also come together to develop a self-regulatory group to prevent further attacks from undermining the market.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 738 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Altcoins

EOS Price Analysis: Cardano Founder Charles Hoskinson Warns of Regulatory Action Against EOS

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  • Charles Hoskinson projects some form of action from the SEC on EOS.
  • EOS/USD enjoys a relief rally on Wednesday, as price moves further north following recent bounce.

The EOS price hasn’t done much but decline of late. Back in August, EOS/USD entered into a very stubborn narrowing range. The price had been confined within this mode of trading right up until November. The range was seen from the $6 territory down $4 area. On the 19th November, EOS/USD bears had finally pushed for a breakout to the downside, from this mentioned range-block. Following this fall, the price plummeted over 60%, over the course of 3 weeks.

Cardano Founder Hoskinson Expresses EOS Regulatory Concerns

The Cardano (ADA) founder, Charles Hoskinson, has beliefs that EOS chief developer of the network is likely to face strong action from regulatory bodies. The SEC would be a potential regulator that investigates their $4bln ICO, as he has described as “egregious.”

Speaking at a press conference in Edinburgh, Charles Hoskinson has made a projection that the Securities and Exchange Commission will look at taking firm measures against Block.One. He believes that this would be done due to the way it had run and hosted the EOS ICO.  Hoskinson further detailed how the EOS token sale sits within the remit of the regulators for them to review the potential for harm of retail investors in the United States.

Charles Hoskinson Anticipating SEC Action on EOS

Hoskinson predicted that the SEC will likely bring punitive measures against Block.One for the way it ran the EOS Initial Coin Offering. The IOHK leader explained that EOS’ token sale falls well within the regulator’s remit to take action against any financial activity which harms US retail investors.

There were several fundamental issues with the EOS ICO, which clearly raise red flags, from Hoskinson’s view. He expressed for particular focus on the amount they had raised over the course of a year, in addition to their “utter lack of respect” for investors. Hoskinson said, the SEC “needed” to take action.

Technical Review – EOS/USD

EOS/USD daily chart

Most recently, the price has managed to stabilize, which could be due to sellers exhaustion. A bounce was seen on 7th December, after falling to a low of around $1.55. The bulls are attempting to make a convincing push back into the $2 territory. Demand in the near-term should now be observed from that recent low, $1.55 up to $1.80.

It is interesting to note the area of which EOS/USD received some comfort on 7th December (this is a known acting support). Back in November 2017 during the big bull run, the price consolidated within the mentioned demand zone for a brief period. This came before continuing its strong move to the north.

Downside Observations

EOS/USD daily chart

Should the near-term area of support fail to hold, then there could be some devastating moves to the downside. A breach of the $1 mark could very well be seen. The next major demand area will be within the depths of $0.90 region. EOS/USD had last traded down here again within the early part of Nov 2017 bull run.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 107 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Bitcoin

Bitcoin ETF Watch: VanEck, SolidX and CBOE Met With SEC on Monday

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Backers of a highly-touted bitcoin exchange-traded fund (ETF) application met with U.S. regulators last week to present a new case for why their proposed product should be approved. The contents of the meeting, which were published on the Security and Exchange Commission’s (SEC) website Wednesday, gave new reasons why the regulator should approve a specific rule change that would pave the way for the first crypto-backed fund to be listed.

Bitcoin Market Ready for ETF, Proponents Say

According to the SEC’s memorandum, the Office of Market Supervision met with members of VanEck, SolidX and CBOE on Monday. Rather than focus on regulation, the ETF backers argued that the bitcoin market is mature enough to list an ETF. The proponents also listed several examples of similar products that have been launched for commodities like gold and crude oil.

“Similar to commodity futures, the spot and futures prices [of bitcoin] are tightly linked,” the proponents argued, adding that “this is evidence of a well-functioning capital market.”

The proponents also urged the SEC to remain consistent in its definition of “significant markets,” arguing that bitcoin futures “is a significant, regulated market” when compared to the “dry bulk shipping market” that has already received regulatory approval for ETFs. The SEC has stated repeatedly that the bitcoin market lacks the significance and scale to protect investors against manipulation. VanEck and SolidX have long maintained that the bitcoin market is less susceptible to manipulation.

The meeting followed a closed-door gathering in late October that VanEck claimed had resolved issues regulators had identified in their previous disapproval orders. As Hacked reported, dozens of bitcoin ETF applications have been rejected outright by the securities regulator over concerns of market manipulation and investor safety.

Bitcoin ETF Unlikely Anytime Soon

Despite repeated efforts to convince U.S. regulators of the merits of a bitcoin ETF, the road to approval remains undetermined. That view was echoed recently by SEC Chairman Jay Clayton, who said the market must undergo important changes before an ETF becomes likely.

“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation. It’s an issue that needs to be addressed before I would be comfortable,” Clayton said during last week’s annual Consensus Invest conference in New York, according to CNBC.

Clayton said venues like the New York Stock Exchange and Nasdaq have “surveillance” mechanisms that can prevent manipulation on the exchanges. However, “those kinds of safeguards do not exist currently in all the exchange venues where digital currencies trade.”

The SEC has yet to reach a final verdict on the VanEck SolidX Bitcoin Trust. At last check, a decision was expected later this month, though the process could get dragged out until February, according to industry sources.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 738 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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