March 28, 2024

Study: Bitcoin growth is hampered by manipulations in the derivatives market

Study: Bitcoin growth is hampered by manipulations in the derivatives market

Why is Bitcoin, positioned as a “safe haven asset”, still not showing global growth against the backgroundglobal macroeconomic crisis? Researchers point to "intensive and large-scale market manipulation."

Record level of manipulation

Researchers from the project teamThe University of Sussex Business School's CryptoMarketRisk has been tracking transactions in the "safe-haven asset" markets since March 2020. The analysis revealed large sell orders for gold futures, literal pumping and dumping of copper futures prices, and large order spoofings on crypto derivatives exchanges.

“Some individual trades on the COMEX were so large that they moved prices — a clear violation of US market abuse laws,— write the researchers.

But widespread instability onthe market means that regulators like CFTC have a lot to pay now, which means even manipulating these markets on a large scale to stay below the regulator’s radar. ”

But in the case of Bitcoin, the actual manipulationwith the market have gone beyond the jurisdiction of the United States. Carol Alexander, professor of finance at the University of Sussex Business School, said Seychelles-based crypto derivatives exchange BitMEX allowed its bots to reduce the price of Bitcoin from $8,217,000 to $4,217,000.

Study: Bitcoin growth is hampered by manipulations in the derivatives market

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“Since the S&amp;P 500 crashed in March 2020, gold had its worst week in eight years, when it was supposed to be its best, due to huge liquidations in COMEX gold futures.&#8212; Carol Alexander explained.

Bitcoin was also defeated by some fairly obvious robotic manipulators on unregulated crypto derivatives exchanges, especially BitMEX. ”

The correlation between Bitcoin and the S&amp;P500 is growing

The study also draws comparisons between the current crisis and the 2008 financial crisis, examining gold's response to the S&amp;P500 decline.

The CryptoMarketRisk team notes that the crashLehman Brothers created a correlation between the US index and the yellow metal of -40%. However, in March and April 2020, the correlation between assets was +20%.

Correlation can vary from 100%&#8212; changes on price charts completely coincide up to -100% &#8212; inverse correlation &#8212; when one asset rises, the other falls by an equal number of percentage points.

The study replaced gold with Bitcoin andfound a similar correlation. Since its creation in 2019, Bitcoin has remained an uncorrelated asset. But since the cryptocurrency crashed in March 2020, its correlation with the S&amp;P 500 has exceeded 63%. As of May, it had fallen, but to an alarming high of 40%.

Study: Bitcoin growth is hampered by manipulations in the derivatives market

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After the price collapse in March, Bitcoin has recoveredto $10,000 and spot gold recovered to its seven-year high, the correlation left both safe havens exposed to broader downside risks.

A recent survey conducted by Bank of America among...global fund managers showed they don't see a V-shaped recovery on Wall Street. This means the Dow Jones, S&amp;P 500 and Nasdaq Composite indexes could reverse their amazing upward trend in the coming quarters if they are not supported by the Federal Reserve.

By repeating the March 2020 fractal, investors canuse gold and bitcoins to cover their losses elsewhere. Moreover, they can dump assets to increase liquidity through cash.

CryptoMarketRisk researchers agree with this:

“The largest beneficiaries of these market attacks, in addition to those that conduct bidding, are holders of US dollars and US assets.”

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