The Chief Marketing Officer a blockchain security company has been charged with embezzlement; Peter Thiel calls Bitcoin a ‘weapon’ of China (but no one cares), and CZ’s net worth rises to $1.9 billion.
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Blockchain security company Beosin has been the focus of a major scandal after its Chief Marketing Officer Gao Ziyang was taken into custody and charged with embezzlement of state-owned assets. He is alleged to have been using government funds to unsuccessfully short BTC, resulting in a massive liquidation of over 300 million renminbi, or $45 million dollars.
Beosin, also known as Lianan Tech, had a working relationship with Chinese authorities and was helping them investigate fraudulent fundraising schemes. After the seizure of funds back in 2020, Beosin was tasked with storing and selling the assets, to be later returned to the state treasury. Instead of selling the assets, CMO Gao Ziyang allegedly opened a short position in late August, hoping to increase the size of the positions for personal gain. At the time, BTC was trading around $12,000.
Authorities say that records obtained from OKEx show the position began using 10x leverage, before increasing to 100x, and eventually ended up in liquidation. They began to ask about the whereabouts of the funds, before finally realizing that the assets were no longer in the wallet. Online, people have marveled at the age of Gao Ziyang, who was described as in his twenties. The future of Beosin, which was once regarded as a credible blockchain security company in China, is now in serious doubt.
Peter Thiel’s Bitcoin claims ignored
On Wednesday, PayPal co-founder and venture capitalist, Peter Thiel warned that the Chinese government may be using Bitcoin as a “financial weapon” to undermine the stability of the U.S. Dollar. The reaction was quite muted, as only 30 comments responded to the story on Sina Finance, a social media account with over 23 million followers. One of the top comments simply pointed out that “Bitcoin wasn’t invented by China” while another comment simply stated “Impossible”.
On Thursday, Binance founder Zhao Changpeng, better known as CZ, appeared as #1664 on Forbes’s annual billionaire list. His net worth is now listed at $1.9 billion, an increase of $700 million from the last list in 2020.
Nanjing Ribensi bought by US company
US Company Future FinTech announced earlier this week that they had agreed to a deal to acquire China-based mining company Nanjing Ribensi Electronic Technology Co. Nanjing Ribensi operates a mining farm that can handle up to 30,000 Bitcoin mining machines. The deal was worth approximately $9.1 million dollars and stipulates that the mining company must generate no less than approximately $2.3 million dollars in 2021.
Blockchain standards accelerated
China’s National Development and Reform Commission called for the accelerated implementation of blockchain standards in a new plan released on April 1. The plan was jointly issued by 28 government departments and also included technologies such as cloud computing, IoT, and big data.
This weekly roundup of news from Mainland China, Taiwan, and Hong Kong attempts to curate the industry’s most important news, including influential projects, changes in the regulatory landscape, and enterprise blockchain integrations.
Here’s how Bitcoin’s intraday volatility complicates leverage trading
Derivatives exchanges offer up to 100x leverage, but traders must consider how Bitcoin’s intraday volatility increases their liquidation risk.
The crypto sector is in a bull market, and frequent evidence comes from anonymous traders who post their five-, six- and seven-figure investment returns as screenshots on Crypto Twitter.
This condition creates a FOMO-like situation where everyone gets greedy. The temptation to boost potential earnings by twenty times or more is often irresistible for most novice traders.
Today, almost every cryptocurrency exchange offers leveraged trading using derivatives. To enter these markets, a trader has to first deposit collateral (margin), which is usually a stablecoin or Bitcoin (BTC). However, unlike spot (regular) trading, the trader cannot withdraw from a futures market position until it has been closed.
These instruments have benefits and can improve a trader’s outcomes. However, those who often rely on incorrect information when trading futures contracts end up with heavy losses rather than profits.
The basics of derivatives
These leveraged futures contracts are synthetic, and it is even possible to short or place a bet on the downside. Leverage is the most appealing aspect of futures contracts, but it is worth noting that these instruments have long been used in stock markets, commodities, indexes, and foreign exchange (FX).
In traditional finance, traders measure daily price change by calculating the average closing price changes. This measure is widely used in every asset class, and it’s called volatility. However, for various reasons, this metric isn’t helpful for cryptocurrencies and can harm leverage traders.
Bitcoin 60-day USD volatility. Source: BuyBitcoinWorldwide
To be brief, the higher the volatility, the more often an asset price presents wild oscillations. Contrary to the expectation, moving up by 7% to 10% every day represents a low volatility indicator. This happens because the deviation from the mean is small, while random fluctuations between a negative 3% to a positive 3% present a much wider range.
Markets with very low volatility are perfect for leverage
Knowing the general range of how an asset oscillates is extremely important when opening leverage positions. Take the British Pound Sterling (GBP), for example, and one will notice that its volatility is usually below 1% as surprise aggressive daily price changes are unusual.
GBP currency 60-day USD volatility. Source: BuyBitcoinWorldwide
FX markets are relatively stable markets when compared with stocks and commodities. Therefore, some regulated brokers offer even 200x leverage, meaning a 0.5% move against the position would cause a forced liquidation.
For a cryptocurrency trader, the Swiss Franc’s (CHF) daily change versus the U.S. dollar would likely be seen as a stablecoin.
Swiss Franc (CHF) USD prices. Source: Investing.com
However, the 3.4% daily Bitcoin volatility hides a more dangerous price fluctuation. While measuring daily closing prices for traditional markets makes sense, cryptocurrencies trade non-stop. This difference potentially creates much wider movements within the same day, although the daily closing often masquerades it.
Bitcoin price low-high-close USD prices. Source: CoinMarketCap
The average change between the Bitcoin intraday high and low of the past 180 days is 6.5%. As shown above, these ‘intraday moves’ surpassed 10% on 25 occasions. Meaning, in reality, BTC price oscillations are much larger than expected for a 3.2% daily volatility asset.
20x leverage seems crazy considering Bitcoin’s daily moves
To put things into perspective, a 5% move in the wrong direction is enough to liquidate any 20x leveraged Bitcoin position. This data is clear evidence that traders should really consider risk and volatility when leverage-trading cryptocurrencies.
Fast profits are nice, but what is more important is being able to survive the usual daily price swings to hold on to those unrealized gains.
Although there’s not a magical number to set the best leverage for every trader, one must account for the effect of volatility when calculating liquidation risks. Those aiming to keep positions open for more than a couple of days, aiming for 15x or lower leverage, seem to be ‘reasonable.’
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Polkadot-centric derivatives exchange raises $6.4M in seed funding
The successful private investment round highlights growing conviction in the Polkadot ecosystem.
DTrade is planning to build the first derivatives exchange on Polkadot following a highly successful private investment round.
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Decentralized exchange dTrade is bringing derivatives trading to the Polkadot ecosystem after concluding a $6.4-million seed investment round, setting the stage for wider decentralized finance use cases on the developer network.
The private investment round was led by some of the biggest names in the blockchain venture capital world, including Three Arrows Capital and DeFiance. Polychain Capital, ParaFi Capital, Huobi, Mechanism Capital, Bixin Ventures, IOSG Ventures, Hypersphere Ventures and Fenbushi Capital also participated.
Several companies have also stepped up to support liquidity on dTrade, including Alameda Research, CMS Holdings, MGNR, Kronos and Wintermute.
As a decentralized exchange, dTrade allows for the trading of perpetual swaps and options with on-chain settlement. In theory, the platform can accommodate unlimited derivatives markets without custodial and counterparty risks. The trading platform is not available to United States-based traders.
“Derivatives are on track to become the largest market in decentralized finance, similar to how they are the largest asset class in traditional finance,” said Nikodem Grzesiak, co-founder of dTrade. “Derivatives are an exciting use case of blockchain. Entirely new perpetual swaps for blockchain-based assets within Polkadot’s multi-chain architecture can be added through a simple governance proposal.”
The popularity of crypto derivatives has exploded over the past year as participants seek additional exposure to the rapidly growing market. CoinMarketCap’s 2020 annual report found that crypto derivatives accounted for 55% of the total cryptocurrency market last year.
Polkadot’s developer network has also grown rapidly, with 435 projects having launched on the platform at the time of publication.
Dfinity’s ICP token sees violent first day of trade on major exchanges
Following five years of development, Dfinity’s Internet Computer token is trading on major exchanges.
Dfinity’s “Internet Computer” tokens are finally tradable after five years in the making.
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The launch of the Internet Computer utility token has seen a wild first day of trading after its long-awaited debut on exchanges.
The ICP token from Dfinity was listed on Coinbase Pro and several leading exchanges including Binance, Huobi Global, and OKEx on May 11.
Over four hours, prices for the newly launched token have swung from an early intraday high of $700 down to $250, before recovering 70% over 10 hours to trade for $425 at the time of writing. Coingecko estimates $1.8 billion worth of ICP tokens have traded just 14 hours since trade commenced.
ICP/USD chart, 24 hours: Coingecko
The Internet Computer is a decentralized blockchain project by the Dfinity Foundation. Dfinity describes the protocol’s mission as expanding the functionality of the public internet from a network that connects billions of people through standard protocols to a publicly accessible global supercomputer based on its own ICP protocol.
It has the lofty ambition of replacing the trillion-dollar legacy internet and IT industry by allowing developers to install their code directly on the public internet — dispensing with hosting companies, servers, commercial cloud services, and tech monopolies.
Like Ethereum, the platform would allow developers to run computing applications on decentralized infrastructure. However, Dfinity claims superior scalability over Ethereum’s Layer 1 mainnet.
While Dfinity has been focused on building this Internet Computer since 2016, much of the project’s inner workings have been shrouded in mystery due to its policy of closed-source development. The platform’s Mercury genesis launch event took place on May 7, marking the public launch of the platform after its completed mainnet initialization in December 2020.
ICP tokens can be staked into its governance system to earn “voting rewards” or be converted into “cycles” that can be used to power smart contract computation. The Internet Computer platform runs on a Network Nervous System (NNS), which is an open algorithmic governance system that oversees the network and the token economics.
The system is broken down into several subsections which include the ICP tokens in addition to “neurons” and “canisters” which govern the network autonomously and are explained in much more detail on the Dfinity blog.
The project started fundraising before the 2017 ICO boom under the DFN ticker but has since rebranded to ICP.
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