Or why the Bitcoin crash deserves the name “Bitcoin OTC Crash”.
The crypto press was very excited when news came that Bitcoin’s OTC market was outstripping itself. The Tabb Group report estimated that the Bitcoin OTC market had reached three times the volume of the exchange market. Circle, meanwhile a company of Goldmann Sachs, announced already in summer 2018 record transactions with OTC Prime Services. Ostensibly a positive market signal. The headlines in the crypto press have already announced the upcoming bull market. The big money is now looking for the bitcoin, was a general belief.
But big money never seeks anything but profit. Fast profit. Safe profit. Those who have recently studied banking scandals quickly understand that banks know no morality when it comes to fast money. Neither in the Cum-Ex transactions of the banks in Europe nor in the subprime loans business in the USA. The banking system venerates the profit like an idol and leaves only scorched earth. Bitcoin has always been a thorn in the side of banks. But this time, they are making billions with the most recent Bitcoin crash. Caused by them. How?
The preparation phase
Note: Every big deal needs planning. Also with banks.
OTC means over-the-counter. These are deals with all types of assets that are settled directly between two or more trading parties. Private. Behind closed doors. A large investment, which is settled by OTC, cannot be seen on the market ticker. That’s why OTC is very popular, especially if you want to move large sums of money. It is inconspicuous and the demand signal passes the open market.
But you need an accomplice if you want to thread a big OTC deal. An OTC service. A broker. The broker is the middleman. He contacts exchanges and buys sell orders directly from an exchange at a certain price. In a big way! The secret? The orders do not appear on the open market. Everything stays private.
In practice this is something like this: Broker Joe calls Dave from a central Bitcoin exchange and offers: “Hey Dave, we’ll take all sell orders up to 6,200 straight away. You get a premium of one 1/2 percent. The deal is covered by Goldman”. Dave will say, “Sounds very cool, and I can earn more than with my trading fees”. And Joe will say, “Our deal will not go through your order book!”. This is a prime. A prime is a large package of orders that an exchange is selling directly to a broker. That’s the whole secret that Bitcoin was doomed to.
The honest Bitcoin enthusiast, who sold his bitcoins on his central Bitcoin exchange at that time, did not notice. His sell order went straight to the OTC broker and bypassed the order book. No one was hurt, as the seller did not get their money from any other smaller Bitcoin buyer, but from a major investor in the background.
While the press cheered the OTC boom, OTC brokers prepared the next Bitcoin mega-crash on behalf of the banks. But blaming the brokers would be too easy. Most likely, they themselves did not know about the mega-deal the banks have been set up in the background.
The mega deal
Note: Every big deal is a safe deal.
Rich people hate to lose money. In this league, you are only doing safe business. Insider trading.
The banks have initially stocked up on a big scale with Bitcoins via OTC. Nobody knew what was going on at that time. When their portfolios were full of bitcoins, the last step was taken. Then they bought Bitcoin futures at the CME and “speculated” on falling bitcoin prices. The beauty of these Bitcoin futures contracts is that they can be leveraged. If you want to trade a volume of 10 million with a leverage of 1:100, you just need to put 113,960 dollars on the table. This is particularly lucrative if you know exactly in which direction the Bitcoin market will move. And that’s what the bankers knew. Because they themselves would cause a big price drop on the Bitcoin spot market. After all, they have not bought all the bitcoins on the OTC market because of ideology. Ideology is a bad investment strategy. They bought for quick big profits.
The execution
Note: Bankers like to have a pleasant Christmas feeling.
On November 14th was payday. At 8 o’clock in the morning in New York, someone from the executive suite called his bank’s trading room. “Sell bitcoins until a new order arrives.” Silence. Hundreds of thousands of Crypto enthusiasts did not believe their eyes. Only the bankers knew what was happening.
The collected OTC bitcoins are now being sold in a big way on the Bitcoin spot markets. They have enough in their portfolio to beat the price at least 20%. Finally, they expect a high premium in the futures market plus leverage. At the same time, the profits of their short contracts are growing immeasurably. The bigger the losses on the Bitcoin spot market, the better for our greedy bankers. The losses incurred on the sale of bitcoins on the spot market are factored in. In the end, it will be a billion profit business. Result? Today, the Bitcoin price fell back to about 4,200 US dollars. The bankers will celebrate a nice Christmas and laugh about their mega-deal with a glass of Champagne. And the Crypto Community sinks into FUD.
And can someone be made responsible for that? No, the Bitcoin market is not regulated. Price manipulations are possible. The same would certainly not happen in the stock market, because the SEC would make a lot of trouble. But with Cryptos no issue.
