Cryptocurrency exchanges

Winklevoss twins infuse Gemini with $100M personal loan: Report

The cash infusion reportedly followed Gemini attempting to get funding from outside investors without success.

Tyler and Cameron Winklevoss, co-founders of the United States-based cryptocurrency exchange Gemini, have reportedly dipped into their own pockets to fund the business amid the crypto market downturn.

According to an April 10 Bloomberg report, the Winklevoss twins made a personal $100-million loan to Gemini following attempts to get funding from outside investors. Cointelegraph reached out to Gemini for comment, but did not receive a response at the time of publication.

The reported loan came amid regulators scrutinizing Gemini’s activities. In January, the U.S. Securities and Exchange Commission charged Gemini, as well as Genesis Global Capital, with offering unregistered securities through the exchange’s Earn program. New York’s Department of Financial Services also reportedly began investigating the exchange following reports many Gemini users claimed assets in their Earn accounts had been afforded FDIC protection.

Related: Gemini and Genesis’ legal troubles stand to shake up industry further

Following the announcement of the charges, Tyler Winklevoss accused the SEC of issuing a “manufactured parking ticket,” claiming Gemini staff had been in talks with the regulator for more than a year prior to its enforcement action. The complaint echoed that of crypto exchange Coinbase, whose chief legal officer said personnel met with SEC representatives “more than 30 times over nine months” but still received a Wells notice.

Magazine: SBF denies stealing FTX assets, SEC charges Gemini and Genesis, and more

4 signs the Bitcoin price rally could top out at $26K for now

BTC price faces pullback risks thanks to bearish on-chain movements and challenging technical resistance levels.

Bitcoin (BTC) received a substantial boost this week as United States inflation levels for February were in line with market expectations. On March 14, the BTC/USD pair surged to a 2023 peak at $26,550 after the news.

But, while the macroeconomic conditions may currently favor risk-on buyers, certain on-chain and market indicators hint at a potential correction in the near term.

BTC flows back to exchanges as price rises

On March 13, Glassnode’s exchange flow data recorded the most significant inflow to exchanges since May 2022. This means more supply on exchanges and potentially higher selling pressure.

The coin days destroyed indicator, which measures the time-weighted transfers of Bitcoin, also shows a small spike, indicating that old hands are moving coins. The indicators might signal profit booking by long-term holders, which can lead to a correction.

Bitcoin exchange netflow volume. Source: Glassnode

Bitcoin funding rates, RSI jump

Moreover, the funding rate for Bitcoin perpetual swaps is also elevated with the latest Consumer Price Index print. In other words, more traders are betting on the upside with leveraged positions, increasing the risk of a correction.

Funding rate for Bitcoin perpetual contracts. Source: Coinglass

The sharp price movement has also recorded a significant spike in the Relative Strength Index (RSI), a technical momentum indicator, with a reading of as high as 82. This means that BTC/USD is generally considered “overbought” in the short term.

BTC vs. USD painting a bearish pattern

BTC price is currently forming a broadening wedge pattern, which depicts the heightened level of volatility. Both buyers and sellers are pushing the price beyond support and resistance levels, with the reversals coming quickly.

BTC/USD 4-hour price chart. Source: TradingView

Buyers failed to stage a pattern breakout on March 14, and are now facing resistance at its ceiling of $26,700. At the same time, there is a chance that the price will correct back toward the bottom of the pattern, around $19,500, in the coming days.

On the contrary, if Bitcoin’s price breaks above the top trendline, the bulls will likely pile in to push the price toward $30,000. There are potentially welcome signs for the bulls that this could happen — namely in the BTC options and futures markets.

As Cointelegraph reported, there’s still room to run, as the indicators have yet to reach previous peak levels.  

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Crypto exchanges need to start giving customers their keys

Exchanges should introduce decentralized finance to their centralized models to protect their customers and restore confidence in cryptocurrency.

The business model that cryptocurrency exchanges currently use relies on ignorance and fear. 

It relies on their customers not knowing much about decentralized finance (DeFi) and their fear of what could happen if they get things wrong with their crypto investments.

Cryptocurrencies seem like an obscure and risky investment to most, and unsurprisingly, concerns about losing assets in market crashes, losing wallets or security keys through carelessness, or being scammed by unscrupulous operators are prevalent. These concerns are reasonable considering the volatility of the market and the prevalence of sharks, crooks, bluffers and shysters who operate in the industry.

In theory, exchanges exist to assuage these concerns. They exist to mitigate that risk for your average retail investors, who are given a safety mechanism to hedge against losing their savings. This model has enabled exchanges to grow at an exponential rate in recent years and to create vast fortunes in the process.

However, it would be remiss of those who run crypto exchanges to assume that the current level of ignorance and the fear it engenders will remain in perpetuity. Customers are learning more all the time; they are becoming far savvier. The next generation is learning about crypto in a number of different ways, such as through market trends such as GameFi and nonfungible tokens (NFTs). As adoption spreads, the knowledge of the average customer increases accordingly. This, in turn, makes them less reliant on exchanges.

Related: FTX illustrated why banks need to take over cryptocurrency

Many customers will also have been spooked by stories about disgraced crypto entrepreneur Sam Bankman-Fried, who masterminded the implosion of FTX. In light of this, exchanges do not seem like such a safe and secure option after all. It is likely that a combination of these factors will accelerate a trend toward customers wanting more control over their crypto assets, and if exchanges want to avoid risking being cut out completely, they need to embrace this.

That is why exchanges — if they want to survive, if they want to avoid their own downfall — should lean into this trend, instead of fighting against it. To do this, they must empower their customers and trust them with their own money and security keys.

That is not to say that this will be simple or easy. Understandably, there are technical and educational constraints when giving security keys back to customers. If a customer loses their security keys, the likelihood of them being able to access their assets ever again is pretty much zero.

Exchanges also have a technological challenge. Their entire infrastructure is centralized, which is ironic, to say the least. It is not entirely in keeping with the spirit of decentralized finance. There are some good reasons for this.

Uniswap, the ecosystem for DeFi apps, is decentralized, taking only a small fee per transaction. However, this comes at a price. Uniswap is unregulated, which means pretty much anyone can create a scam token and perform a rug pull. This is why exchanges do their best due diligence on projects — it’s to ensure that this kind of thing doesn’t happen.

Related: What to expect from crypto the year after FTX

But there are ways in which centralized exchanges could implement more decentralized methods without falling into some of the pitfalls. It is possible to create a kind of hybrid — to get the best of both worlds.

Retail investors and the average exchange users quite understandably don’t want to buy a token that could be a rug pull. But they also want the safety of knowing that their crypto can be accessed at any time. However, the price of ownership and assuming control of the assets means taking on the requisite responsibility, which, in turn, necessitates the requisite level of education. Exchanges that are considering the future of crypto need to understand this.

Critically they need to understand that the sooner customers become educated on crypto, the sooner they’ll find themselves on a direct pathway to complete decentralization. Therefore, I would call on exchanges to take the decentralized way forward by creating a hybrid system that protects customers as well as their own brands.

History is littered with examples of corporate giants that failed to adapt and paid the price. Blockbuster was an arrogant behemoth that never thought streaming would be a thing; today, it is dead. Money is the same. It’s not your money if the bank owns it; it’s not your crypto if an exchange holds it. Freedom comes from letting go of the fear of responsibility.

Companies, like living organisms, have to adapt to changing environments in order to survive. It’s clear that customers want to be able to fully control their digital assets. If exchanges don’t embrace this trend, they may just embrace their own destruction.

Mark Basa is the managing director of the Web3 division of Xwecan, a global PR and communications agency. He is also the director of Hokk Finance and the co-founder of Muraskai, a blockchain mobile game and media studio.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

$3 billion in Bitcoin left exchanges this week amid FTX contagion fears

It appears that more investors are choosing to self-custody their BTC funds in the wake of the FTX scandal and fallout.

Bitcoin (BTC) investors are withdrawing funds from exchanges at a rate not seen since April 2021, with nearly $3 billion in Bitcoin withdrawn over the past seven days.

New data from on-chain analytics firm Glassnode shows that the number of wallets receiving BTC from exchange addresses hit almost 90,000 on Nov. 9.

Exchange users wake up to self-custody

Amid ongoing turmoil over the bankruptcy of major exchange FTX, concerns have heightened among exchange users over the security of funds.

Commentators have upped advice to avoid custodial wallets and take control of crypto assets, and regulators are increasing scrutiny of the crypto industry en masse.

On-chain figures suggest that a large number of hodlers have opted for noncustodial wallets over the past week.

The number of withdrawing addresses saw a huge spike on Nov. 9, this surpassing the daily highs for both May and June this year when BTC price action last saw significant downside pressure.

For Nov. 12, the latest date for which data is available, withdrawing addresses still totaled over 70,000.

Bitcoin exchange receiving addresses chart. Source: Glassnode

The same Glassnode data gives an hourly average of over 3,000 withdrawing addresses over the seven days to Nov. 13.

Bitcoin exchange receiving addresses chart. Source: Glassnode/ Twitter

Analysis: BTC reserves may not tell whole story

The numbers tie in with what appears to be rapidly-declining BTC reserves across major trading platforms.

Related: Bitcoin will shrug off FTX ‘black swan’ just like Mt. Gox — analysis

While the velocity of the drop suggests that the true balance tally may be difficult to confirm at present, data from fellow on-chain analytics resource CryptoQuant puts overall exchange reserves at their lowest since February 2018.

CryptoQuant tracks a total of 38 exchanges, including those with reported financial problems such as FTX and Kucoin.

Bitcoin exchange reserve chart. Source: CryptoQuant

Another chart, this time from Coinglass, suggested 177,000 BTC in weekly withdrawals through Nov. 13 — a United States dollar value of around $3 billion at today’s price.

BTC balance on exchanges chart. Source: Coinglass

Glassnode senior analyst Checkmate nonetheless flagged three exchanges in particular with what he called “particularly weird” Bitcoin balance readouts — Huobi, Gate.io and Crypto.com.

Concluding a dedicated thread into the topic, he noted that “Exchange balances are best estimate based on wallet clustering. They are more likely to be a lower bound than an overestimate.”

“These fund flows between exchanges include both real customers + FTX/Alameda. Hard to separate, thus looking as relative-to-balance,” he added.

Forecasting how the current scenario may play out, Michaël van de Poppe, founder and CEO of trading firm Eight, meanwhile, said that the worst was likely not yet over.

“Probably we’ll have more issues with exchanges coming weeks, but probably also a ton of gossip,” he told Twitter followers at the weekend:

“Stay safe, be calm and don’t make emotional decisions. We’re in terrible territories, but crypto will come out of this stronger.”

BTC/USD was trading at around $16,500 at the time of writing, data from Cointelegraph Markets Pro and TradingView showed.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Celsius Network’s bungling showed why centralization can’t protect privacy

Celsius’ bankruptcy proceedings resulted in 14,000 pages of customer data leaking to the public. The incident displayed the pitfalls of centralized finance.

In Celsius Network’s recent court filing, the billion-dollar centralized finance (CeFi) platform exposed more than 14,000 pages of customer identity and on-chain transaction data without user consent — a prescient reminder that privacy absent decentralization is no privacy at all.

As part of its bankruptcy proceedings, CeFi lending giant Celsius Network disclosed names and on-chain transaction data of tens of thousands of its customers in an Oct. 5 court filing. While Celsius’ user base complied with standard Know Your Customer (KYC) procedures in order to open personal accounts with the CeFi platform, none consented to nor could have anticipated a mass disclosure of this scope or scale.

In addition to doxxing the multi-million dollar withdrawals of Celsius founder Alex Mashinsky and chief strategy officer Daniel Leon just before Celsius’ bankruptcy announcement, the disclosure directed tens of thousands of CeFi users to reconsider what resolute privacy protections entail and how systems that incorporate any degree of trust or centralization stand to compromise those protections.

To protect privacy, any degree of centralization or specialized authority that exchanges use in the future must eschew the bungled Celsius model. Otherwise, privacy will be rendered yet another false promise teased out in the fine print.

Uncharted territory

While unsavory, at the very least, Celsius’ mass data dump points to more than an outright distrust of authority and opaque organizations. As per usual, at the intersection of on-chain finance and law, there’s a lot of gray area.

An emergent and nascent industry, the blockchain space has already spun up a mess of unprecedented conflicts and disputes that neither existing legislation nor established case law has developed a reliable methodology to navigate. Even in the heavily nuanced legal environment of 2022, courts are not adequately prepared to uphold established legal principles in the on-chain domain.

Related: Coinbase is fighting back as the SEC closes in on Tornado Cash

In defense of their customers, Celsius’ legal representatives allege that they issued requests to redact private customer data from their disclosures. However, their requests were ultimately rejected by the court on the grounds that all Chapter 11 Bankruptcy proceedings require a complete and transparent “Creditor Matrix.” Obviously, such a bankruptcy rule was penned and passed several eras before the emergence of distributed on-chain lending protocols; a time when financial institutions did not have 14,000 pages worth of supposed creditors.

To make matters more unclear, Celsius legal officials have also claimed that, as per Celsius’ terms of service, all user funds deposited in the platform essentially belong to Celsius. Thus, as a self-regarded de-facto owner of all customer deposits, Celsius’ public release of customer transaction data treads further into hazy legal territory as to the parameters that define ownership — and, therefore, privacy protections — in the on-chain space.

Whatever the case, Celsius’ customers have permanently lost their privacy. The only sure verdict is that there can be no certainty in depending on an unprepared legal system to uphold privacy rights in fluid and uncharted territory.

Celsius isn’t alone

Although dramatic, Celsius’ meltdown is only the most recent in a stint of CeFi industry bankruptcies. The platform’s billion-dollar deficit presented in bankruptcy filings has been much less the exception than the rule.

Once one of crypto’s dearest and most powerful CeFi platforms, Celsius’ rise and downfall serve as a painful reminder to crypto critics and advocates alike that a core team can become a singular point of failure at any time. And further, centralized KYC procedures always carry some risk of exposure in legal proceedings.

The predicament tens of thousands of innocent crypto investors now face points to a much broader principle: that privacy cannot be truly conferred nor absolutely protected within the confines of a centralized system. Even with the best intentions in mind, professionals on both sides of the court have little legal precedent to draw from as they navigate the novel and perplexing territory.

Related: Government crackdowns are coming unless crypto starts self-policing

As on-chain data analytics become more sophisticated, hackers more conniving and personal data ever more valuable to marketing agencies and authorities, privacy-conscious individuals must exercise the utmost prudence in determining which crypto platforms best align with and protect their interests.

After all, Google, Meta, and the rest of the Web2 platforms that the crypto community has since dismissed as exploitative and archaic are about as private as Celsius and its CeFi counterparts. Each provides privacy as a service. Meanwhile, its users’ search histories, account information and browsing preferences are private to almost everyone — except, of course, the platform itself. As Celsius’ bankruptcy proceedings have proven, even the most well-intended custodians are not a sufficient substitute for decentralized architecture.

The true promise of systems built on blockchain is that what they confer, be it asset ownership, scarce monetary units or permissionless contracts, cannot be regulated, erased or modified on a whim. Their constitutions are written in code. Any and all modifications are coordinated and executed by decentralized autonomous organizations ( DAOs). There is no trust between counterparties, only a shared belief in the permanence of principle and the wisdom of the collective.

In the same way, privacy has been a prerequisite for personal freedom and self-expression since time immemorial, decentralization is today a prerequisite for privacy online — and, to that end, on-chain.

Alex Shipp is the chief strategy officer at Offshift, where he contributes to platform tokenomics, produces content and conducts business development on behalf of the project. In addition to his industry role as an expert in private decentralized finance (PriFi), he has also served as a writer at the Elastos Foundation and as an elected ecosystem representative on the Cyber Republic DAO.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Regulators have a weak case against FTX on deposit insurance

FTX made an error in messaging when it suggested depositors were insured, but federal regulators will have a hard time proving the exchange did so with sinister motives.

In a cease-and-desist letter to fast-growing crypto exchange FTX, the Federal Deposit Insurance Corporation (FDIC) shed light on a now-deleted tweet from the exchange’s president, Brett Harrison, and issued a stark warning over the company’s messaging.

Harrison’s original tweet said, “Direct deposits from employers to FTX US are stored in individually FDIC-insured bank accounts in the users’ names.” He added, “Stocks are held in FDIC-insured and SIPC [Security Investor Protection Corporation]-insured brokerage accounts.”

Although Harrison stewarded FTX to its best-ever year in 2021, increasing revenue by 1,000%, the firm now faces the unenviable prospect of running afoul of a powerful government agency.

In an attempt to clarify the situation to his 761,000 Twitter followers, Brett said, “Clear communication is really important; sorry! FTX does not have FDIC insurance (and we’ve never said so on website etc.); banks we work with do. We never meant otherwise, and apologize if anyone misinterpreted it.”

But it seems the statements made on Twitter by Harrison in response to the FDIC cease-and-desist letter over “false statements” were factually correct: User funds are held at banks insured by the FDIC.

Related: FDIC–FTX spat is another reason for investors to get their funds off exchanges

His original communications were construed as if the funds were themselves insured, which they’re not. Either way, firms are not allowed to mention a relationship with the FDIC unless there is a direct link and the correct language is used to clearly describe it.

This was an error in messaging on the part of FTX. A mistake was definitely made, inciting perhaps rightful outrage from the community. They may have taken this to believe they were transacting with an insured exchange, which could ensure catastrophic failure would not lead to a loss of funds after all.

However, it’s almost certainly not the case that there were sinister motives. Harrison wrongfully communicated the relationship between FTX and the FDIC and was swiftly corrected before he immediately moved to rectify the official FTX position on deposit insurance. Nothing more than a storm in a teacup, one might say.

The FDIC issued similar cease-and-desist letters to four other companies on the same day for the exact same reason: implying there is deposit insurance when none exists. It begs the question of whether this is really a result of nefarious actions.

Companies like Celsius do represent a threat to the industry

There is plenty of chagrin to throw around the crypto space. Take Celsius, for example. It’s fair to argue the company’s policy terms and conditions did not align with what it implied through its messaging. Around 1.7 million customers were left in the lurch with little idea of whether they would be able to retrieve their funds.

Rug pulls, scams and fraud thrive in a low-regulation industry, and indeed, this means there are plenty of villains out there at which to direct public anger .

When it comes to FTX, there is an observable mission to do serious business and foster legitimacy in the world of cryptocurrencies. This is an exchange very much on the ascendancy, attracting and retaining over 1 million users and trading around $10 billion in daily volume as of February 2022.

Related: Binance vs. FTX: CZ calls out ‘bad players’ for crypto exchange jitters

Consumers should not distrust or dislike big players just because they are big. These firms are likely the harbingers of mainstream adoption, which is surely the aim of crypto. Self-custody is obviously the safest way to store funds, but not everyone can ensure they mitigate all associated risks. Their best bet is an exchange like FTX.

Regulators should become more proactive and less reactive

A focus on the experience of the end-user is perhaps murky when it comes to cryptocurrencies. Volatility means retail investors most often lose money, while tracing transactions can be difficult and the government wants to retain the ability to do so.

Right now, it seems regulators can only step in after an egregious mishap and that must be corrected. While crypto is seeping into the mainstream, the overall public perception seems to be negative, and mass adoption will only be possible years into the future.

Regulations working in tandem with the emergence of mainstream solutions that provide a genuinely great user experience could be key. Policymakers have had plenty of time to prepare for a future with blockchains underpinning vast swathes of real-world applications. Once the technology matures to the point it is as simple as using the internet, the prospect of intelligent regulatory oversight becomes far more likely.

Toby Gilbert is the CEO of Coinweb.io, a cross-chain computation platform. He graduated from London’s Global University (UCL) before starting a career in the tech and telco spaces. He invested in and exited three telecommunications companies in Europe, Africa and Asia before joining Coinweb in 2018. He also co-founded the Blockfort and OnRamp DeFi projects.

The opinions expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.

Korean financial watchdog to block tens of unregistered exchange websites

Korea’s Financial Intelligence Unit is cracking down on foreign-based cryptocurrency exchanges that are yet to register with relevant authorities in the country.

Unregistered cryptocurrency exchanges operating in South Korea could see their services grind to a halt as the Korea Financial Intelligence Unit (FIU) takes action against 16 foreign-based firms.

The FIU has notified its investigative authority that 16 virtual asset service providers have been carrying out business without the necessary registrations. Major exchanges, including the likes of KuCoin, Poloniex and Phemex, were listed alongside 13 other exchanges that are set to be hamstrung by the FIU.

All 16 exchanges have purportedly engaged in business activities targeting domestic consumers by offering Korean-language websites, running promotional events targeting Korean consumers and providing credit card payment options for cryptocurrency purchases. These activities all fall under the Financial Transactions Report Act.

The FIU has already taken action against the unregistered exchanges by reporting the violation of registration duties and intends to inform their counterparts in the respective countries wherein the businesses operate. Unregistered entities face five years in prison, a fine of roughly $37,000 and a potential ban on future registration in the country.

Related: South Korea’s small crypto exchanges face increasing regulatory heat

A request has also been submitted to the Korea Communications Commission and the Korea Communications Standards Commission to block domestic access to the websites of the exchanges in question.

Credit card service providers have been requested to identify and block cryptocurrency purchases made with credit cards. The FIU has also issued a requirement to registered exchanges in the country to suspend transactions from the 16 unregistered companies in an effort to curb transfers to other platforms.

In July, South Korea’s Financial Services Commission announced a deadline for local and foreign-based, cryptocurrency-related businesses to register with the relevant authorities. Sept. 24 is the due date for companies to register before they are liable to face criminal prosecution and the prospective fines and penalties previously mentioned.

While the FIU takes aim at unregistered exchanges, the FSC has vowed to expedite the review of 13 different bills relating to cryptocurrencies under the consideration of the National Assembly of South Korea. Efforts are being made to produce legislation that has a balanced approach to blockchain development, investor protection and market stability.