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Author: Chen Zhi
Editor: Zhou Pengfeng
“Playing is heartbeat.” Zhao Cheng, a senior Bitcoin investor, said to reporters with emotion.
Faced with a sharp drop of more than 11,000 US dollars in Bitcoin since this week (a decrease of about 30%), he appeared quite calm. Because he has sold most of the bitcoin before it hit a record high of $42,000 per coin.
In his view, Wall Street investment institutions bear extremely high responsibilities for the Bitcoin roller coaster market.
“In fact, most Wall Street investment institutions regard Bitcoin as a speculative profit tool, but in order to buy profits, they spare no effort to give Bitcoin a halo of alternative gold, anti-inflation, and countering the depreciation of the dollar, attracting a lot of Retail investors followed up and became the last picker.” Zhao Cheng said bluntly.
It is worth noting that with the ups and downs of Bitcoin, many investors have experienced the cruelty of liquidation.
On January 11 alone, the total amount of liquidation in the encrypted digital currency market exceeded 1.648 billion U.S. dollars, with more than 112,000 liquidated positions, of which Bitcoin liquidation amount exceeded 1 billion U.S. dollars.
“Most liquidators are new investors who have chased Bitcoin with high leverage since January. They are attracted by the aura of Bitcoin replacing gold, and with the dream of Bitcoin breaking through $100,000, they are 15-20 times higher. Leverage is chasing up Bitcoin.” An encrypted digital currency exchange person told reporters.
The painful lessons of these chasers seem to be doomed. Because during the previous period of Bitcoin’s surge, there were many weird phenomena in the encrypted digital currency trading market: first, the phenomenon of false transactions in some encrypted digital currency transactions increased sharply, attracting unsuspecting new investors; second, some trading platforms were down. Abnormal trading events such as machine, flashbacks, stalls, and undisplayed positions frequently occur, affecting users’ normal trading operations such as placing orders, canceling orders, and closing positions. Once they encounter a significant change in the bitcoin price, many investors have no choice but to accept High-leverage investment has a bitter fruit.
“Behind this, the price of Bitcoin has been manipulated again. It used to be the Amber boss, this time it is the Wall Street investment agency.” He pointed out. According to data, as of early December 2020, Wall Street investment institutions have more than 50% of the Bitcoin supply, so they are fully capable of controlling Bitcoin’s trend in the short term.
Monitoring by relevant departments found that as of December 31, 2020, a total of 2,260 Bitcoin addresses had a balance of more than 1,000 Bitcoins, and a total of about 7.89 million Bitcoins were held, accounting for 44% of the total Bitcoin circulation; The currency distribution is becoming more and more “concentrated”, creating operating space for certain investment institutions to manipulate market prices to make profits.
“Since January this year, the market has been speculating that more and more institutional investors have entered the market to increase their holdings of Bitcoin. As everyone knows, after the price of Bitcoin has soared by more than 35,000 US dollars, many Wall Street investment institutions have entered the Bitcoin futures market or derivatives. Buy a large number of short positions with an execution price above $40,000.” Wall Street hedge fund manager Zhang Gang told reporters that this may be the real driving force behind the sharp fall in Bitcoin this week.
Wang Jinlong, founder and CEO of Haitou Global, told reporters that looking at the price trend of Bitcoin in the past few years, it will be found that the price rises and falls are closely related to the supply halving cycle every four years. After halving the supply in 2016, Bitcoin quickly fell back to around $3,000 after it soared to $20,000 within a year. Last year, Bitcoin’s supply halved again, which does not rule out Wall Street investment institutions following the same method to make profits.
On January 14, European Central Bank President Lagarde pointed out that for investors who regard Bitcoin as “currency”, it is very sorry that it (that is, Bitcoin) is only a highly speculative asset that has also been used As a completely reprehensible tool for money laundering.
However, speculative capital has not yet completely left the market. As of 8 o’clock on January 15th, Bitcoin rebounded to around 39,500 US dollars / coin, and once regained the round of $40,000 / coin overnight.
From air-squeeze to anti-air-squeeze
In Zhao Cheng’s view, this round of bitcoin prices can be traced back to September 2020. At that time, many Wall Street investment institutions entered the market one after another, making Bitcoin the new favorite of the financial market.
The reporter’s preliminary statistics found that since September last year, various investment institutions on Wall Street have coincidentally favored Bitcoin. In the field of public equity funds, Riot Blockchain inc. (US) and Bit Digital inc. (US) continue to increase their holdings of Bitcoin; in the field of private equity funds, Stone Ridge Holdings Group (US), GrayScale Bitcoin Trust (US), Coinshares/ XBT Provider (EU) has bought Bitcoin on a large scale; in the ETF field, 3iQ The Bitcoin Fund and ETC Group Bitcoin ETP (DE) have received financial support from many institutions, and their Bitcoin holdings are increasing day by day…
By December 2020, Bitcoin investment has become extremely crazy-as long as the market is rumored to have new investment institutions entering the market, it will drive the price of Bitcoin to jump. The most typical case is that in mid-December, Ruffer Investment Management, a British investment institution with assets under management of US$27.3 billion, suddenly announced that it would invest 2.5% of its portfolio in Bitcoin. At first, the financial market thought that the 2.5% investment portfolio corresponds to a multi-strategy hedge fund sub-product of Ruffer Investment Management with a scale of approximately US$600 million.
When the Ruffer Investment Fund spokesperson clarified this, pointing out that 2.5% of the investment portfolio corresponds to US$27.5 billion in total assets, and that US$745 million in Bitcoin investment had been completed at the end of November, the buying sentiment in the Bitcoin market suddenly boiled over. That night, the price of Bitcoin broke through US$2,2697.5 per coin, with a cumulative increase of over 18% for two consecutive days.
In the eyes of the above-mentioned encrypted digital currency exchange people, behind this is the Wall Street investment agency that has created too much hype for the soaring Bitcoin.
“At first, we were quite happy to see this kind of hype.” Zhao Cheng recalled to reporters. In 2017, he has been in a state of floating losses since he chased up Bitcoin at US$14,000. This time Wall Street institutions have entered the market to make Bitcoin continue to soar. He finally tasted the return of “long-term holding”. He admitted that Bitcoin’s rally since December 2020 has been completely crazy-let him smell the speculative air.
The whole market atmosphere has become quite weird: while many experienced Bitcoin investors admit that the speculative atmosphere is too strong, but on the other hand they dare not sell short rallies or cash out, do not want to miss a higher return on investment; at the same time, a large number of new entrants Investors in the market completely adopt a reverse investment strategy. As long as Wall Street institutions sing empty Bitcoin, or regulatory authorities introduce new regulatory measures on encrypted digital currencies to cause the price of Bitcoin to pull back, those who buy up will consider short positions and quickly increase their positions. Rising Bitcoin to sniper bears.
Reporters have learned from many sources that due to the huge money-making effect brought about by the soaring price of Bitcoin, the leveraged investment multiples of new investors have risen. Before December 2020, many new investors have leveraged around 10 times. As the Bitcoin price continuously broke through the integer thresholds of 25,000, 30,000, and 40,000 US dollars in the past 1.5 months, the leverage of new investors reached more than 20 times.
“This creates excellent conditions for profit from short-squeeze operations.” A Wall Street event-driven hedge fund manager who participated in short-selling bitcoin on rallies told reporters.
In his view, the current explanations that Bitcoin plunged more than $11,000 on a single Monday are more or less untenable. For example, some institutions blamed the sharp decline of Bitcoin on the 10-year U.S. Treasury yield that caused the dollar to bottom out, but in fact, the U.S. dollar index only rebounded from the year-end low of 89.2 to 90.3, an increase of no more than 1%; some institutions believe that the United States The new government will introduce a new fiscal stimulus plan to make the US economy recover faster and the Fed’s tightening of QE policy faster than expected, which is the “culprit” that triggered the sharp fall in Bitcoin, but since this week, many Fed officials have clarified that the Fed has not planned Tighten QE during the year.
“For these reasons, it is difficult to conceal the fact that Wall Street investment institutions self-directed and acted on the rise and fall of Bitcoin to profit from it.” The event-driven hedge fund manager emphasized.
Reporters have learned from many sources that since Bitcoin broke $40,000 on January 7, many hedge funds have begun to sell Bitcoin on rallies, or buy various derivatives of short-selling Bitcoin in the Bitcoin futures market or over-the-counter market.
“We are based on the Bitcoin Greed Index to determine the timing of the rallies. Looking at the negative correlation between Bitcoin and the Bitcoin Greed Index in the past few years, as long as the Bitcoin Greed Index breaks through 90, it will fall sharply if there is a slight disturbance.” A Wall Street quantitative investment hedge fund manager told reporters. Since December last year, the Bitcoin Greed Index has continued to exceed 93, which has shown that the market speculative atmosphere has become excessive-chasers have become greedy and fanatical (At that time, many investors had determined that the peak of Bitcoin’s increase was $100,000/ However, given that the price of Bitcoin continued to soar at the time, his hedge fund waited until the Bitcoin Greed Index broke through $42,000 and hit a record high of 98 on January 7 before deciding to sell short.
“It’s not just us, but other Wall Street investment institutions scrambled to sell bitcoin (or buy bitcoin put futures option derivatives) during the week of January 7, so this round of bitcoin’s sharp rise is destined to be the end of the battle.” He pointed out. This means that Wall Street investment institutions have long been ambushing on all sides and can only chase investors into the urn. Given that more and more new investors are adopting 15-20 times leverage to chase up Bitcoin, most Wall Street investment institutions believe that-as long as the price of Bitcoin drops by more than 10%, these high-leverage chasers will also face the risk of liquidation and cause Bitcoin to fall Expansion, so that they can reap more substantial short selling returns. “In fact, we didn’t expect that the price of Bitcoin would drop by about 30% this week.
“The above-mentioned quantitative investment hedge fund manager said bluntly. This is enough to make many Wall Street investment institutions involved in short-selling rallies a lot of money. The reporter learned that many hedge funds participating in Bitcoin buying low and selling high are the only one. , The actual return in the past 4 months is as high as 120%-160%, but behind this impressive performance, many high-leverage investors have suffered a liquidation crisis.
In the face of Bitcoin’s ups and downs, Zhao Cheng admitted that it has long been commonplace. Years of Bitcoin investment experience made him clearly realize that this is a market that can be easily manipulated.
William, the chief researcher of OKEx Research, said that the rise and fall of bitcoin prices have been largely affected by changes in investor sentiment and changes in risk appetite. Moreover, investors’ risk appetite and sentiment towards Bitcoin can easily jump from one extreme to another. For example, when Bitcoin continued to fall to a low of $3,000 before, many investors believed that Bitcoin was “worthless” under the circumstances of regulatory pressure and lack of application scenarios, and they did not want to buy on dips at all; The coin soared above 42,000 US dollars per coin, and these investors firmly believe that bitcoin has the value of replacing gold and so on.
Zhao Cheng believes that this switch of mentality among investors has made Bitcoin an extremely easy asset to be manipulated.
The above-mentioned encrypted digital currency exchange person told reporters that Bitcoin was labeled as a substitute for gold, just after a large number of Wall Street investment institutions bought Bitcoin in September. Behind this is the insight of Wall Street investment institutions into investors’ mentality changes. .
Zhang Gang bluntly stated that in order to guide more and more investors to change their mentality and become enthusiastic about Bitcoin, some Wall Street investment institutions have even migrated their illegal operations in the stock futures market to the encrypted digital currency trading market.
Specifically, since October last year, the phenomenon of false quotations on some digital cryptocurrency exchanges has increased significantly-at many trading moments, the Bitcoin market will suddenly produce large purchase orders (they disappear quickly and fail to be traded), but This move caused many retail investors to believe that new institutional investors entered the market to increase their holdings, which made them increasingly “believe” that Bitcoin will exceed $100,000 per coin, thereby increasing leverage to catch up.
“In fact, this kind of false quotation practice has long been regarded as price manipulation by the U.S. financial regulatory authorities. Many large European and American investment banks suspected of false quotation operations affecting commodity price fluctuations have suffered huge fines. However, due to the lack of supervision in the Bitcoin market, many The false quotation practices of hedge funds have become popular, even enough to influence the rise of Bitcoin since October last year.” He pointed out.
Monitoring by relevant departments found that the trading platform Coinbene is suspected of a large number of false transactions (to create a pattern of rising Bitcoin volume and price through artificial volume to attract investors). Coinbene’s SPV (Daily Per Capita Volume) is as high as 59.95 bitcoins per person, which is equivalent to 1.2 million US dollars per person at an average price, which is much higher than other trading platforms. Therefore, Coinbene has been suspected of a large number of false transactions. In addition, other digital currency exchanges such as Binance and Bitfinex have also been suspected of having a large number of false transactions.
“In fact, what can most inspire retail investors’ enthusiasm and greed for Bitcoin is the survey of third-party R&D institutions, which found that Wall Street investment institutions have mastered over 50% of the Bitcoin supply. This has led many investors to believe that more and more institutions are investing. People have regarded Bitcoin as an important asset allocation product.” Zhang Gang believes. When the investor mentality completely reached the peak of frenzy and greed in early January, the purpose of price manipulation by Wall Street investment institutions had been achieved, and they began to quietly sell short rallies to “harvest leeks.”
The reporter has learned from many sources that in early January, a number of hedge funds in the Bitcoin futures market have all done “risk hedging” for all Bitcoin positions—that is, buying short-selling Bitcoin futures positions with an execution price of more than $40,000. Wait. The price of Bitcoin dropped sharply to enjoy the high return of “short selling”, and their average holding cost of a single Bitcoin was only $18,000-23,000.
“It’s still impossible to tell whether many hedge fund leaders warned that Bitcoin is the mother of the bubble in early January. Was it a secret signal for many investment institutions to sell Bitcoin short at the same time. But an indisputable fact is that these warnings have indeed triggered this At one time, Bitcoin plunged by about 30%, even more than the influence of the US Treasury Department’s plan to strengthen the supervision of the flow of funds and account information for Bitcoin transactions at the end of November last year (Bitcoin fell by about 13% at the time).” Zhang Gang analyzed to reporters. Say. This invisibly shows that the price manipulation power of Wall Street investment institutions on Bitcoin has already exceeded the policy effect.
“In fact, most Wall Street investment institutions only recognize the investment value of Bitcoin in a specific period, and do not intend to include it in a long-term investment portfolio.” A director of the asset allocation department of a large Wall Street asset management institution said frankly. The reasons are that the global central bank’s regulation of encrypted digital currencies has become stricter, and the price of Bitcoin is highly volatile, which does not meet the long-term investment of institutional investors to pursue stable returns.
Behind the mining machine fever
The soaring Bitcoin has also brought about a continuous increase in mining machine investment fever.
A mine operator revealed to reporters that Bitcoin has exceeded $20,000, and the number of investors interested in “mining” mining machines is increasing.
“Some new mining machine investors optimistically estimate that if the price of Bitcoin stays above 35,000 US dollars, they will invest in 20 mining machines for mining, and the actual monthly return (after deducting about 20,000 yuan monthly electricity costs and other operating costs) can still be Reached 30,000 yuan.” He told reporters.
In the face of many investors, the mine operator chose to decline. The reason for this is that the recent power shortages in many places in China have caused many hydropower stations in Sichuan to be transferred to other provinces and cities for “emergency relief”. The two mines he is responsible for operating (both in hydropower stations in remote areas of Sichuan) are not enough. The power supply of the mines has led to insufficient computing power and power support in its mines, and the expected profit of mining has dropped sharply; if the mine is relocated to an area with surplus power, the operating cost is much higher than before.
In addition, the influx of a large number of mining machine investors is making Bitcoin mining machines “hard to find”. Currently, the latest mining machine S19pro produced by Bitmain is officially priced at 27,700 yuan, but the current market transaction price has reached more than 50,000 yuan. This means that even if the price of Bitcoin soars, the cycle for mining machine mining to recover costs is still stretched for several months.
“In fact, the mining farm is not afraid of the violent fluctuations in the price of Bitcoin. As long as it can continue to mine, it can generate revenue, but we are most afraid of power outages and the revenue will disappear all at once.” He said bluntly. Another reason why I declined many investors is that the tightening of regulations has made it difficult for Bitcoin mining income to be smoothly credited to investor accounts.
The reporter learned from many parties that in the past, when investors signed a mining machine investment contract with a mining farm, they would agree on two methods of payment of mining income. One is to settle the mining income cash after deducting operating costs such as electricity charges at the agreed time, and the other is the mining farm. Give the mined bitcoins to investors, and then the investors will pay for the relevant electricity bills and other operating costs in cash.
“Although Bitcoin has continued to soar before, many mining machine investors still choose the former settlement method because they are worried about the risk of violent fluctuations in the price of Bitcoin and feel safer to take cash. However, as the price of Bitcoin has soared, More mining machine investors are demanding to directly hoard coins to gain profits.” The mine operator told reporters. But in the actual operation, the withdrawal of coins is becoming a big problem.
In the past, they earned cash from relevant mining proceeds to investors’ Alipay or bank card accounts. However, with the tightening of supervision in recent years, if they choose to transfer funds directly, the investor’s account is likely to be suspected of money laundering in encrypted digital currencies or the source of funds. Frozen for compliance.
Therefore, they have tried to convert Bitcoin into a stable currency pegged to the U.S. dollar, then sell off in exchange for RMB cash through over-the-counter transactions, and finally transfer the cash out funds to investors’ domestic accounts.
The reporter has learned from many sources that it is difficult to “work through” this kind of operation now. Because the seller sells bitcoin in the over-the-counter market (transferring bitcoin to the buyer’s digital currency account), once the buyer makes a transfer payment through a bank card or Alipay, the relevant accounts of both parties will also be involved in encrypted digital currency transactions (suspected of money laundering) And was frozen.
The aforementioned mine operator bluntly stated to reporters that the most feasible way to withdraw cash at present can only be an over-the-counter commodity trading model. That is, the buyers and sellers will give “guarantees” through some encrypted digital currency exchanges to complete the Bitcoin-Renminbi (or U.S. dollar) transaction overseas, and then use private investment institutions to exchange funds (that is, they collect U.S. dollars overseas and Transfer the corresponding RMB to the designated account) to realize the investor’s mining income. However, as relevant departments have tightened their crackdown on illegal cross-border flows of funds, this mode of operation is now also encountering huge challenges.
“So we tend to choose investors with overseas accounts to sign mining machine investment contracts.” He told reporters. Because they complete a series of operations such as withdrawing coins, selling, cashing out, and fund settlement overseas, they are relatively “safe”.
The reporter has learned from many sources that there are many mine operators who carefully select mining machine investors.
A person in charge of a large domestic mine operating agency told reporters that in addition to the above concerns, they are also worried that once the price of Bitcoin drops sharply, it will easily trigger disputes between mining machine investors and mine operators again. Earlier, Bitcoin’s drop to US$3,000 caused mining machine investors to lose 20,000-30,000 yuan per month, which directly caused many mining machine investors to come to “accountability”. Many people simply refused to pay electricity bills, chose to shut down, and get mining machines. The electricity fee was used to leave the site, and even accused the mining farm of “concealing” the fact that the mining cost has been doubled due to the halving of Bitcoin’s supply every four years (in fact, it was truthfully informed when the contract was signed).
He acknowledged that although the previous soaring Bitcoin has made the entire mining farm “daily” millions of yuan in additional income, this good day may not last. After all, Bitcoin is a highly speculative asset. Once the capital is no longer The pursuit has caused the price of Bitcoin to plummet, and they have to spend a lot of time and energy to appease mining machine investors, avoiding mining machine investors complaining to the regulatory authorities, leading to relevant departments requesting rectification of the mine, then this mining business May be marked with a rest.
It is worth noting that more and more countries are “saying no” to crazy mining behavior.
On January 14, the Iranian government announced the cessation of mining activities by all licensed Chinese Bitcoin companies in the country. The reason is that as the price of Bitcoin soars, more and more Chinese companies have moved their mining farms to Iran by taking advantage of Iran’s low electricity bills. .
According to agency estimates, the local general industrial electricity price in Iran is about 0.3 yuan/kWh, which means that the total cost of mining a bitcoin is about 9,000 yuan/unit. Based on the current bitcoin price of about 40,000 US dollars (about 260,000 yuan), as long as eight bitcoins are mined, the cost of contracting local small gas-fired power plants can be recovered, and the mining profitability period has begun.
According to statistics from the Bitooda website, after the United States and China, Iran has become the world’s third-largest Bitcoin holder, accounting for approximately 8% of its currency holdings.