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University of Sussex Researchers Say Blatant Market Manipulation is a Disaster to Traditional Safe Havens

The University of Sussex Business School recently published an analysis indicating that widespread market manipulation is a serious problem that regulators should deal with so that to confront false prices and avoid distorting the minds of investors.

According to the report, the COVID-19 pandemic has created huge volatility in global financial markets. But as one might expect, prices of safe-haven assets like Bitcoin and gold are not surging, a problem that is caused by large-scale and intense manipulation.

Insider dealing and market abuse

In recent months, the CryptoMarketRisk team at the University of Sussex Business School has been tracking trades on these markets and have identified massive dump and pump on copper futures, huge sell orders on gold futures, and large spoofing orders on key cryptocurrency exchanges.

The team identified that some single trade on COMEX has been so huge as to move prices, which is a clear contravention of US laws on market abuse. The COMEX, commonly known as The Commodity Exchange, is a division of the New York Mercantile Exchange, which trades futures in metals like aluminum, silver, gold, and copper.

The rampant market turmoil implies that regulators like the Commodity Futures Trading Commission (CFTC) have a lot of work to do as large-scale manipulation of such markets remain below the surveillance of regulators.

Carol Alexander, a professor at the Business school said, “As funds flow out of equities, one would expect demand for gold and Bitcoin to increase. But this time around, safe havens have behaved completely differently. Gold and Bitcoin have fallen at the same time as US equities. As the S&P 500 crashed in March 2020, gold had its worst week in eight years when it should have been the best, because of massive shorts on COMEX gold futures. Bitcoin has also been driven down by some pretty obvious manipulation bots on the unregistered crypto derivatives exchanges, especially BitMEX.”

Alexander added that the world is experiencing financial market manipulations on a frequency and scale that have rarely been witnessed before. The professor mentioned that a few powerful market players lack integrity, a phenomenon causing a major financial market meltdown of the current global economy.

Beyond those placing the trades, the biggest beneficiaries of such market attacks are holders of US assets and US dollars. These become the key sources of positive returns for global investors attempting to curtail the recent trend of some central banks to diversify their reserve holdings away from the US dollar.

Bitfinex and tether face market manipulation class-action lawsuit

With the expansion of crypto markets and also the existence of several sellers and buyers who are looking to gain from their trades, manipulation has taken a new display. Forgers are able to manipulate the trading activities of the crypto market and provide a false display and mislead investors and encourage them to buy their digital assets. Manipulation is an obstacle to market depth and a serious concern to investors.

Last year, New York-based legal firm Roche Freedman filed a lawsuit against Tether and Bitfinex for crypto manipulation and creating bubbles to profit from boom and bust cycles they created. The lawsuit stated that Tether and Bitfinex were involved in money laundering, pumping, and dumping cryptocurrencies, and engaged in a sophisticated scheme to defraud investors. It is, therefore, upon regulators’ responsibility to protect crypto consumers and investors and promote an environment of innovation to maximize the potential of blockchain technological advances.

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Goldman Sachs Says Cryptocurrency Is an Alternative to Copper, Not Gold

Jeff Currie, global head of commodities research at Goldman Sachs, recently said that cryptocurrencies are an alternative to copper but not gold.

In an interview with CNBC, Currie stated that investors should not see cryptocurrencies as a substitute for gold when considering inflation hedges. Based on his views, he said that crypto does not fit the narrative of “digital gold”, saying that cryptocurrencies are more like digital copper instead.

Currie explained that although both gold and cryptocurrencies are something of a hedge against inflation, the risks that come with crypto assets imply that their value is quite different from those of safe-haven assets such as gold.

The economist argued that cryptocurrencies are not a substitute for gold, stating that cryptos would substitute for copper instead as they are pro-risk.

According to Currie, Bitcoin is correlated to the business cycle since it links to an underlying payment structure. Due to that reason, Bitcoin is a better substitute for a “risk-on inflation hedge.”

Currie said that such types of inflation hedges, including copper hedge against good inflation, resulting from increased demand. On the other hand, he stated that gold hedges against “bad inflation, which results from a change in supply.

“There is good inflation, and there is bad inflation. Good inflation is when demand pulls it, and that is what bitcoin hedges, that is what copper hedges, that is what oil hedges,” Currie stated.

“Gold hedges bad inflation, where supply is being curtailed, which is … focused on the shortages on chips, commodities and other types of input raw materials. And you would want to use gold as that hedge,” Currie further explained.

Cryptocurrency Not Replacing Gold

With global debt on the rise, it appears that companies and individuals are looking for ways to preserve wealth by hedging against inflation. Since the beginning of this year, corporations and individuals began to hedge their bets against the increasing inflation threat.

In February, Tesla carmaker announced that it purchased more than $1 billion worth of Bitcoin as part of its balance sheet. In April, the car company’s bets appeared to have paid off after Elon Musk announced that Tesla sold 10% of its Bitcoin holdings, and it made a profit of more than $100 million.

Musk stated that Tesla sold 10% of its BTC holdings to show that the liquidity of Bitcoin is an alternative to holding cash on the balance sheet.

Many companies have been paying attention, and many are buying Bitcoin as part of their treasury reserve. More and more firms see crypto assets as essential tools in the global economy.

Cryptocurrencies continue to prove themselves as important forms of payment. They may not necessarily replace gold as an inflation hedge or safe-heaven, but they are making their mark as a global exchange means.

Former UK Minister, Philip Hammond Joins Crypto Firm Copper as Senior Adviser

Former Chancellor of the Exchequer, Lord Philip Hammond of Runnymede has joined the London-based digital asset custodial service provider, Copper, as its Senior Advisor.

According to an announcement from Copper, Lord Hammond’s appointment takes effect immediately and the government veteran will help the company provide all necessary valuable advice and suggestions on issues seeking to expand into the eastern United States and Asia.

Backed by steady growth in the past 18 months, Copper has recently acquired $75 million funding from private investors. Copper looks to broaden its reach in a bid to tap into the institutional frenzy for cryptocurrencies.

“We are delighted to welcome Lord Hammond to the Copper team. Over the last 18 months, Copper has grown exponentially, now serving over 400 institutional clients,” said Dmitry Tokarev, Chief Executive Officer, Copper, “We would like to drive growth in our client base within a regulatory framework which will allow us to thrive globally from our London headquarters.  With Lord Hammond’s expertise adding to the strength of our team, we look forward to growing Copper and further enhancing the UK’s digital asset technology offering.”

Lord Hammond’s experience was most expressed in the UK government as he served under Prime Ministers David Cameron and Theresa May. He served as chancellor of the Exchequer from 2016 to 2019, Foreign Secretary from 2014 to 2016, and Defence Secretary from 2011 to 2014. During his tenure in these government positions, he understands trends and the impact of regulations, all of which will be contributed to Copper as a Senior Adviser.

The move to appoint former top government officials into crypto firms’ advisory boards is becoming common today. Earlier, Blockchain.News reported that Jay Clayton, the former US Securities and Exchange Commission (SEC) boss under President Donald Trump was appointed as one of the advisors to One River Digital Asset Management firm back in March.

More appointments like this may be seen in the near future as cryptocurrency firms look to navigate the yet-to-be-friendly regulatory terrain in major crypto hotspots.

Barclays to Buy Stakes in Crypto Firm Copper

Barclays Plc is buying a stake in Copper.co, a UK company specializing in cryptocurrency custody and trading. Under the deal, the UK-based bank is among several new investors joining a funding round for Copper.

Bloomberg media reported on Sunday, citing sources that Barclays is expected to invest a few millions of dollars as part of the round. The fundraising is expected to be completed within days.

Sophie Arnold, head of communications for Copper, confirmed the development but said: “As the funding round is ongoing, we’re unable to comment on this report.”

Copper offers custody, prime broking and settlement services to institutional investors (such as digital currency asset managers, hedge funds, and family offices) investing funds into cryptocurrencies.

Launched in 2018 by Dmitry Tokarev, Copper has drawn investors from big names in the global venture capital sector, such as LocalGlobe, Dawn Capital and MMC Ventures.

In May last year, Copper raised $50 million in a Series B funding round co-led by investors like Dawn Capital and Target Global, joined by LocalGlobe, Illuminate Financial, and MMC Ventures.

Facing Challenges

Although Copper assigned former UK Chancellor Philip Hammond among its advisers in October last year, the crypto firm has continued to face frustrations from the UK financial regulators. Early this month, the UK-headquartered digital asset custody technology provider failed to secure a crypto asset registration from the UK regulator, the Financial Conduct Authority (FCA).

On June 29, the custody startup was dropped from a list of FCA temporary registrants as it was one of the firms considered to lack appropriate systems and controls to counter the risk of being misused for financial crime.

The difficult decision prompted Copper to establish a hub in Switzerland instead after it was accepted as a member of the Swiss Financial Services Standard Association.

Earlier this year, Copper targeted a valuation of at least $3 billion in its latest funding raise but has scaled that back because of the rising crisis in the broader crypto industry.

Crypto firms have had a challenging year, and some have faced risks associated with bankruptcies as major digital assets such as Bitcoin have crashed along with other risk assets globally.

In recent weeks, several major market players, including Three Arrows Capital and Celsius, have filed for bankruptcy, a horrible situation that has undermined development prospects and confidence in the industry’s previously breakneck growth.