FUD

Bitcoin bulls’ desire for a trend reversal could be obliterated by this week’s $565M options expiry

Significant headwinds continue to batter BTC, and this week’s options expiry is unlikely to provide any relief.

Bitcoin (BTC) fell below a four-day narrow trading range near $22,400 on March 7 following comments by United States Federal Reserve Chair Jerome Powell before the Senate Banking Committee. During the congressional appearance, the Fed chairman warned that he bank is prepared to tame inflation by pushing for more significant interest rate increases.

Powell added that “the ultimate level of interest rates is likely to be higher than previously anticipated” and that recent economic data was “stronger than expected.” These remarks significantly increased investors’ expectations of a 50 basis point interest rate hike on March 22, putting pressure on risk assets such as stocks, commodities and Bitcoin.

That movement could explain why the $565 million Bitcoin weekly options expiry on March 10 will almost certainly favor bears. Nonetheless, additional negative crypto market events might have also played a significant role.

Bitcoin from the Silk Road and Mt. Gox are on the move

The movement of multiple wallets linked to U.S. law enforcement seizures on March 8 added to the price pressure on Bitcoin investors. Over 50,000 Bitcoin worth $1.1 billion were transferred, according to data shared by on-chain analytics firm PeckShield.

Furthermore, 9,860 BTC were sent to Coinbase, raising concerns about the coins being sold on the open market. These wallets are directly linked to the former Silk Road darknet marketplace and were seized by law enforcement in November 2021.

Mt. Gox creditors have until March 10 to register and choose a method of compensation repayment. The movement is part of the 2018 rehabilitation plan, and creditors must choose between “early lump sum payment” and “final payment.”

It is unclear when creditors can expect to be paid in cryptocurrency or fiat currency, but estimates indicate that the final settlement could take several years.

As a result, Bitcoin’s price drop to $22,000 on March 8 effectively confirmed bears’ advantage on the March 10 options expiry.

Bulls placed far more bets, but most will be worthless

The March 10 options expiry has $565 million in open interest, but the actual figure will be lower because bulls have concentrated their bets on Bitcoin trading above $23,000.

Bitcoin options aggregate open interest for March 10. Source: CoinGlass

The 1.63 call-to-put ratio reflects the disparity in open interest between the $350 million call (buy) options and the $215 million put (sell) options. However, the expected outcome is likely to be much lower, as bulls were caught off guard when Bitcoin fell below $23,000 on March 3.

For example, if the price of Bitcoin remains near $22,100 at 8:00 am UTC on March 10, only $6 million in call (buy) options will be available. This difference occurs because the right to purchase Bitcoin at $22,500 or $24,000 is rendered null if BTC trades below that level on expiry.

Related: Bitcoin clings to $22K as US dollar strength rises to December levels — What’s next?

The most likely outcomes favor bears by a wide margin

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 10 for call (bull) and put (bear) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $20,000 and $21,000: 0 calls vs. 7,200 puts. The net result favors the put (bear) instruments by $150 million.
  • Between $21,000 and $22,000: 100 calls vs. 5,000 puts. The net result favors the put (bear) instruments by $105 million.
  • Between $22,000 and $23,000: 1,400 calls vs. 1,900 puts. Bears have a modest advantage, profiting some $55 million.
  • Between $23,000 and $24,000: 4,600 calls vs. 600 puts. The net result favors the call (bull) instruments by $95 million.

This rough estimate takes into account only call options in bullish bets and put options in neutral-to-bearish trades. Nonetheless, this oversimplification excludes more complex investment strategies.

A trader, for example, could have sold a call option, effectively gaining negative exposure to Bitcoin above a certain price, but there is no easy way to estimate this effect.

To turn the tables and secure a potential $95 million profit, Bitcoin bulls must push the price above $23,000 on March 10. However, given the negative macroeconomic pressure and the FUD emanating from Mt. Gox and Silk Road, the odds favor bears in this week’s options expiry.

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.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

SEC accuses Utah firm of ‘fraudulent’ $18M crypto mining scheme

The United States Securities and Exchange Commission said Green United’s operation was a fraud, with the community quick to quell fears of the SEC classing crypto mining as a security.

Software and crypto mining equipment offered by the Utah-based Green United LLC was part of an $18 million “fraudulent scheme” that never mined the crypto it said it would, according to allegations by the United States Securities and Exchange Commission (SEC).

The regulator filed a complaint in a Utah District Court on March 3 against Green United, its founder, Wright Thurston, and contracted promoter Kristoffer Krohn.

The complaint alleges the company and the two representatives fraudulently offered securities between April 2018 and December 2022 by selling investments in $3,000 “Green Boxes” and “Green nodes” purported to mine the GREEN token on the “Green Blockchain.”

Investors were allegedly told the firm was to develop the Green Blockchain to create a “public global decentralized power grid,” and the GREEN token would increase in value based on its efforts with returns of up to 50% a month.

However, the SEC claimed the hardware sold didn’t mine GREEN as it was an Ethereum-based ERC-20 token that could not be mined and the Green Blockchain didn’t exist.

It added the GREEN token was created “several months” after the first hardware sales to investors and was periodically distributed to “create the appearance of a successful mining operation.”

Instead the real scheme, according to the SEC, was using the funds to buy S9 Antminers — Bitcoin (BTC) mining rigs — which were passed off as the Green “boxes” and “nodes” to investors. The firm mined Bitcoin, not GREEN tokens, which the investors “did not receive.”

Is the SEC going after mining?

Meanwhile, the crypto community on Twitter has hosed down one interpretation of the SEC complaint, which suggests that the SEC is going after crypto miners arguing that selling miners or offering hosting for them is a securities investment contract.

The take came in a March 6 tweet from pseudonymous lawyer “MetaLawMan.”

However, crypto advocate and investment adviser Timothy Peterson argued the interpretation was a “bad take,” adding the case doesn’t “target mining in general.”

“The SEC is not saying ‘all sales of mining equipment is now a security,’” Peterson clarified.

Related: Lawmakers should check the SEC’s wartime consigliere with legislation

Another crypto commentator, Dennis Porter, CEO of the Bitcoin advocacy group the Satoshi Action Fund, tweeted that “the SEC is not coming after mining” and it “did not classify hosting as a security” and said Green United’s operation was “a scam disguised as mining.”

The SEC has asked for a court order to require Thurston, Krohn and Green United to cease operations, seeks civil penalties for securities law violations and repay the $18 million in allegedly ill-gotten gains.

CZ addresses reasons behind Binance’s recent FUD

Binance’s FUD is primarily caused by external factors — not by the exchange itself, according to CZ.

Binance CEO Changpeng “CZ” Zhao took to Twitter on Dec. 23 to share his perspective on the reasons behind the recent fear, uncertainty and doubt (FUD) surrounding the crypto exchange.

According to CZ in the thread, Binance’s FUD is primarily caused by external factors — not by the exchange itself.

One of the reasons mentioned by the CEO was that part of the crypto community hates centralization. “Regardless if a CEX helps with crypto adoption at a faster rate, they just hate CEX,” he noted.

CZ also pointed out that Binance has been seen as competition by many industry players, with increasingly lobbying against the exchange and “loaning sums of money to small media that’s worth many times the media outlet’s market value, including buying their CEOs houses, etc,” referring to The Block’s CEO, Mike McCaffrey, who secretly financed the crypto news platform with loans from Alameda Research.

McCaffrey stepped down as CEO on Dec. 9 after disclosing two loans totaling $27 million from the hedge fund part of FTX Group.

Related: Binance joins lobbying group as criticism of the exchange ramps up

CZ repeatedly cited media outlets’ coverage as the cause of FUD, accusing some of being “paid” to produce it — without providing any evidence.

Further, the executive noted that conservative politicians working to protect traditional financial institutions from crypto disruption were also spreading misinformation. CZ stated that “being conservative is not wrong,” but banks should embrace blockchain technology rather than fighting against disruption. 

Finally, CZ also claimed that there may be a “tiny number of people who are jealous, or just plain racist against Chinese-looking Canadians,” contributing to the spread of FUD against the exchange.

Investors have been moving their crypto assets to self-custody and other exchanges in response to the FUD surrounding Binance since the downfall of FTX. A number of concerns regarding the exchange’s liquidity, its reserves and ongoing investigations in the United States resulted in billions in outflows in the past weeks.

On Dec. 22, Binance also published a blog post in Chinese addressing seven key issues the company intended to clarify, Cointelegraph reported. 

Binance addresses 7 instances of recent FUD via Chinese blog post

Binance is fighting back against the tsunami of FUD it has faced in recent weeks.

The world’s largest crypto exchange, Binance, has been dealing with a torrent of FUD (fear, uncertainty, and doubt) since the downfall of FTX. The firm is now fighting back with its latest blog post.

On Dec. 22, Binance published a blog post in Chinese to address seven key issues the company wanted to clear up. At the time of writing, there was no English language version available.

The first of which was the temporary suspension of USDC withdrawals earlier this month. It explained that this was done during a “token swap” conversion period, with the exchange consolidating its stablecoin reserves into BUSD.

The next thing it addressed was the availability of sufficient reserves for withdrawals. It confirmed that “all users’ assets in Binance are supported 1:1,” and that its financial status was very healthy since it makes ample profit on transaction fees. On Dec. 16, CryptoQuant verified Binance’s reserves, reporting that there was no “FTX-like” behavior.

“Binance will not embezzle users’ funds for any transactions or investments, nor does it have any debts, nor is it on the list of creditors of any company that has recently gone bankrupt.”

Regarding Mazars and the “Big Four” auditing firms refusing to work with crypto companies, it said that encrypted on-chain verification was a new field that these companies may not have the capacity to carry out.

It noted that these audits are typically aimed at the financial situation of the listed company, not verifying reserve assets.

Mazars has since removed Binance’s audit reports from its website. Binance also stated that it did not need to disclose financial information because it was a private company, not a listed one.

“In many jurisdictions where we operate, we have shared or are sharing operational and financial information as required by local regulators.”

Regarding a Reuters report claiming that the U.S. Department of Justice was investigating the company, Binance stated that mainstream media has been targeting the company with salacious reporting for quite a while now. It added that it had the most compliance licenses in the world and spent the most fighting crypto crime.

Related: SBF risks 115 years in jail, Binance’s FUD, and auditors quit crypto

Finally, the blog post reiterated CEO Changpeng Zhao’s comments that Binance did not destroy FTX; FTX did that itself. Binance does not regard other exchanges as competitors, it said, adding tha“we are more focused on continuously promoting and expanding industry adoption.”

So there you have it. The FUD has been refuted but that hasn’t prevented an exodus from the exchange in recent weeks as investors moved to self-custody their crypto assets.

CryptoQuant verifies Binance’s reserves, reports no ‘FTX-like’ behavior

Binance has faced a FUD-storm this week but a new CryptoQuant audit has verified its proof of reserves.

Blockchain analytics provider CryptoQuant has released a report analyzing the recently released proof-of-reserves audit of the world’s largest crypto exchange, Binance.

Centralized exchanges have been cast into the spotlight over the past month following the collapse of FTX, none more so than Binance, which has been scrambling to reassure customers and investors that it has sufficient reserves and is fully backed.

A report by CryptoQuant released on Dec. 14 says its analysis confirms that Binance’s reserves are accounted for.

Earlier this month, Binance released a proof-of-reserves report but it was criticized as being an “agreed-upon procedure” and not a full audit.

Additionally, the report didn’t address the effectiveness of internal financial controls, according to the former chief of the Securities Exchange Commission’s Office of Internet Enforcement, John Reed Stark.

But CryptoQuant has backed the findings of audit firm Mazars, stating that liabilities reported by Binance are very close to its estimation of 99%.

“The report shows Binance’s BTC liabilities (customers deposits) are 97% collateralized by the exchange assets. Collateralization increases to 101% when the BTC lent to customers is accounted for.”

The analytics firm added that on-chain data suggests thatBinance’s Ether (ETH) and stablecoin reserves are “not showing ‘FTX-like’ behavior at this point.”

“Additionally, Binance has an acceptable ‘Clean Reserve,’ which means its own token, BNB, is still a low proportion of its total assets,” it reported.

According to data provider Nansen, around 10% of Binance reserves are held in its token. Binance currently holds $60.4 billion in total assets in its publicly disclosed addresses, and $6.2 billion of that total was BNB (BNB), Nansen reported.

Related: Crypto community members discuss bank run on Binance

Binance has faced a lot of FUD (fear, uncertainty, and doubt) this week that led to $5 billion in withdrawals from the exchange on Dec. 13. Fears of a liquidity crisis and another bank run scenario started to escalate.

However, the situation stabilized the following day and CEO Changpeng Zhao reported that day’s outflows weren’t even in the top five largest for the exchange.

In a Twitter Spaces event, CZ also suggested that 99% of people were not equipped for self-custody of their crypto and that mospeople who attempted it would likely lose their coins one way or another.

Tether to reduce secured loans to zero in 2023 amid battle against FUD

The move comes in response to a wave of mainstream media attacks and FUD, primarily from the Wall Street Journal.

The world’s largest stablecoin issuer, Tether, has pledged to eventually stop the practice of lending out funds from its reserves, saying it is “mission critical to restore faith” in the crypto market. 

In a Dec. 13 post, the stablecoin issuer addressed recent mainstream media FUD (fear, uncertainty, and doubt) concerning its secured loans, among other FUD that h hit the “rumor mill.”

Tether reiterated that its secured loans are over-collateralized and covered by “extremely liquid assets,” while also adding that the firm would be eliminating these loans throughout 2023, stating:

Tether is announcing starting from now, throughout 2023, it will reduce secured loans in Tether’s reserves to zero.

Tether’s secured loans operate similarly to private banks lending to customers using secured collateral, the company explained. However, unlike banks that operate on fractional reserves, Tether claimed that its loans are over 100% backed.

The move is likely in response to a Wall Street Journal report earlier this month alleging these loans were risky, claiming that the “company may not have enough liquid assets to pay redemptions in a crisis.”

It is not the first time that the WSJ has targeted Tether. In August the outlet said that Tether could be deemed “technically insolvent” if its assets fell just 0.3%. The stablecoin issuer refuted the claims at the time, stating that it had increased the legitimacy and transparency of its attestations by hiring a top-5 accounting firm.

According to those attestations, 82% of Tether reserves are held in “extremely liquid” assets.

In October, Tether responded to more media FUD by further eliminating commercial paper from its reserves and replacing the investments with U.S. Treasury bills.

Related: Crypto Biz: You can’t stop the Tether FUD

In its most recent statement, the company stated that it will wind down its lending business without losses and continue its mission to prioritize transparency and accountability.

“We will continue to show Tether’s resilience through the most uncertain times, regardless of the story fabrications and disinformation concocted by Tether Truthers and clickbait headlines from mainstream media that have been consistently wrong about Tether, for close to a decade.”

Tether is currently the leading stablecoin issuer, with 65.8 billion USDT circulating. It has a market share of 46.6%, according to CoinGecko.

Silvergate denies recent FUD, confirms minimal exposure to BlockFi

Silvergate Capital has been quick to distance itself from the now-bankrupt crypto lender BlockFi.

Institutional crypto services provider Silvergate Capital has confirmed its minimal exposure to the embattled BlockFi crypto lending firm.

On Nov. 28, Silvergate announced that its deposit relationship with BlockFi is “limited to less than $20 million of its total deposits from all digital asset customers.” Those deposits totaled $13.2 billion in Q3 according to the firm’s revenue report.

It added that BlockFi was not a custodian for its Bitcoin (BTC) collateralized leverage loans and the firm has no investments in BlockFi.

To quell investor jitters, Silvergate CEO Alan Lane said, “as the digital asset industry continues to transform, I want to reiterate that Silvergate’s platform was purpose-built to manage stress and volatility.”

Silvergate has been the subject of a lot of FUD (fear, uncertainty, and doubt), or “false and misleading statements,” in its words.

On Nov. 29, technical analyst and Swiss investor Walter Bloomberg told his 622 thousand Twitter followers, “Silvergate Capital said to have lent money to BlockFi,” but failed to provide any evidence.

Others have added to the FUD fest with several tweets over the past week. However, most of them were lacking specifics.

On Nov. 28, Cointelegraph reported that BlockFi had become the latest victim of the FTX contagion to file for Chapter 11 bankruptcy.

The filing stated that BlockFi has more than 100,000 creditors, assets between $1 billion and $10 billion, and similar liabilities. The latest high-profile crypto bankruptcy appears to have fuelled this recent round of FUD, which Silvergate has seen fit to refute.

Related: Silvergate Capital’s crypto-to-fiat transfers decrease by $50B compared with Q3 2021

Earlier this month, the WSJ ran an article on Silvergate, claiming that the company was battling the contagion fears. The crypto bank has seen its stock prices plunge this year but that has been the case for most publically listed crypto companies.

SI prices declined 11.1% on the day to finish at $24.45 in after-hours trading, according to Market Watch. Silvergate stock has slumped 83.6% since the beginning of the year.

On Nov. 23, Cointelegraph reported that Block.one CEO, Brendan Blumer, had purchased a stake in Silvergate Capital.