Circle is moving the majority of its Poloniex exchange operations offshore, citing a “lack of regulatory frameworks” in the U.S.
The crypto exchange left a database open on the internet and leaked data for up to 300,000 users.
BitMEX Market Hit Hard Amid CFTC Case
The announcement of an investigation by the United States Commodity Futures and Trade Commission (CFTC) into BitMEX came only two days ago, yet the detrimental effect on the exchange’s popularity has already been substantial.
As reported by Bloomberg, the CTFC has begun a month-long investigation into BitMEX over high leverage trading options and concerns of US citizens accessing the platform. The US government’s stance on cryptocurrency as commodities led to exchanges falling under the jurisdiction of the CTFC. As the exchange was not registered with the regulatory body – a prerequisite for entrance into American crypto markets – any present utilization of BitMEX by US citizens is considered unlawful by the CTFC.
Present concern centered around the exchange is focused on the massive leverage the exchange permits on an already volatile asset. BitMEX CEO Arthur Hayes recently discussed the business model, describing it as “focusing on degenerate gamblers, AKA retail traders in Bitcoin”.
Within a day of information coming forth on the status of the investigation, a crypto enthusiast tweeted his observation of a 33% decline of trade volume on BitMEX:
At the same time, BitMEX saw $83 million worth of BTC leave exchange wallets, presumably by American cryptocurrency traders making their way to the site via VPN.
While other exchanges such as Binance or Huobi offer similar leveraged trading, the extent to which they offer it is nowhere near close to the extreme leverage offered by the exchange, meaning any future concerns are slim.
The main concern stemming from this investigation is the implication of companies being responsible for tracking more than IP addresses in order to comply with geographical restrictions; in fact, depending on the outcome of the investigation, the viability of geoblocking based on IP address as a whole may be threatened.
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As previously reported by Ethereum World News, the massive and widespread news regarding the U.S. Commodities and Futures Trading Commission’s probe into popular cryptocurrency trading platform BitMEX sparked a massive outflow of funds from the platform.
Now, data suggests that the outflow of funding has perpetuated significantly in the time since the probe was first announced, as critics of the leveraged trading platform now accuse it of committing more broad crimes than simply allowing investors to flout its U.S. trading ban.
Investors Continue to Withdraw Crypto from BitMEX After Yesterday’s Massive Outflow
Yesterday, EWN reported that the rumors regarding the CFTC’s investigation into the crypto exchange has sparked a massive outflow of crypto from the exchange, with TokenAnalyst noting in a tweet that from July 19th to 20th, BitMEX only had $12 million enter its platform while $85 million left it.
This significant outflow of funding came closely after news broke that the CFTC – the regulatory authority in the US that is largely considered to have domain over issues related to the crypto markets – was probing the platform for knowingly allowing US residents to access the platform.
Decrypt elucidated in a recent article that registering for an account on the leveraged trading platform as a US citizen is “trivially easy.”
In the time since, the exodus away from BitMEX has perpetuated further, and current data from TokenAnalyst shows that over $22 million has left the exchange over the past 24 hours, while a mere $9 million has entered it.
Investors Fear That BitMEX Misdoings May Go Deeper Than Allowing Users to Flout US Ban
Although the CFTC’s probe – should it find any damning information – could do significant damage to the embattled platform, it is important to note that many of the exchange’s critics believe that its wrongdoings extend far past what it is currently being investigated for.
Nouriel Roubini, an economist and an outspoken critic of both Bitcoin and BitMEX, said in a recent tweet that the crimes committed by the exchange are likely to extend significantly deeper than many may suspect.
“Indeed, as I exposed in my @ProSyn article the list of crimes committed by @BitMEXdotcom and @CryptoHayes is likely to be much broader than the ones alleged to be investigated by the @CFTC,” he said.
Although only time will tell as to whether or not there is any merit to these accusations, it is highly probable that the damage has already been done, and that BitMEX may never fully recover from the mistrust created by these accusations.
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BitMEX Sees Massive Bitcoin Outflow
Users of BitMEX seem to be running scared. According to a Bitcoin blockchain analysis by TokenAnalyst, $85 million worth of BTC has left the exchange in the past 24 hours, while a relatively mere $12 million worth of the cryptocurrency came in. This implies a negative $73 million flow.
To put this in perspective, around half of the days that TokenAnalyst posted “24-hour BTC exchange on-chain flows” for BitMEX, the in and outflows were close to equal, much closer than $12 million and $85 million anyway.
That’s not the only worrying sign. Prominent cryptocurrency trader The Boot, who famously turned thousands into millions on the derivatives exchange, remarked that he/she has been observing clearly “so thin” order books. Boot adds that this has only been accentuated by price action on BitMEX, which has been riddled with odd bouts of volatility that were not present prior to the recent outflows.
This isn’t blatant postulation. Crypto markets analysis firm Skew recently noted that no one “is looking at the average bid/offer spread to trade $10 million of BitMEX’s XBT to USD perpetual swap. In other words, the whales seem to be gone.
All this implies that the platform may have lost some market makers and whale traders, some of which may have been based in the United States.
The odd trend that BitMEX’s order book and user base has taken comes, of course, as Bloomberg has released a report claiming that a prominent American regulator is looking into the exchange.
Per previous reports from Ethereum World News, the U.S. Commodity Futures Trading Commission (CFTC) is looking into if BitMEX has been knowingly allowing American users to trade on its platform. This is presumably in response to the exchange’s sudden spike in volume that came alongside this bull market, with it processing over $1 trillion worth of volume in the past year. Both the CFTC and BitMEX were rather quiet on this whole purported situation. A spokesperson of the Bitcoin exchange told Bloomberg:
HDR Global Trading Limited, owner of BitMEX, as a matter of company policy, does not comment on any media reports about inquiries or investigations by government agencies or regulators and we have no comment on this report.
It is important to note that this rumored CFTC investigation may be unfounded. Arthur Hayes, the chief executive of the platform, has explained that it removes anyone found in violation of BitMEX’s terms of services, which includes a clause about the trading of its crypto derivatives in certain regions (including the U.S. and Quebec). Though, users can bypass these IP checks through virtual private networks, which have become somewhat of a given/no-brainer for tech-savvy Bitcoin investors.
Even if this report didn’t result in the direction that BitMEX’s market is taking, crypto investors may still be worried. Over the past few weeks, a number of key figures in American politics and finance, including President Donald Trump and Federal Reserve chairman Jerome Powell, have warned that cryptocurrencies are not in good standing in the eyes of government agencies and financial authorities. This could imply that heavy-handed regulation is on its way.
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The Jersey arm of Binance has listed the cryptocurrency exchange’s own British pound-backed stablecoin.
Seychelles-based cryptocurrency exchange BitMEX is being probed by the U.S. Commodity Futures Trading Commission over client trades, Bloomberg says.
A 20-year-old college student explains how he made a business of faking trade volumes at crypto exchanges.
A new suite of tools from Coinbase shows how the crypto exchange’s top traders are managing their assets.
BITPoint Japan has said that the roughly 50,000 users who lost funds in its recent hack will be reimbursed in cryptocurrency on a 1:1 basis.