Hands up, anyone who is surprised that a little-known crypto exchange that apparently had the largest bitcoin trading volume on CoinMarketCap has been exposed as a wash trading scam platform. In the world of crypto where apparently everyone made it to Lamboland during the 2017 bull run, and absolutely everybody knew when to sell, no one will admit that they have been played. Since Bitwise published its investigation two days ago showing that at least 95 percent of all bitcoin trading volume is faked on unregulated exchanges, the standard refrain has been “Everyone already knew that.”
To admit otherwise would be to admit that one is a “noob” and possibly a “bagholder,” but the fact that platforms like CoinBene continue to exist and perpetrate what should be a transparent scam is indicative of a deeper problem within crypto. For whatever reason, otherwise sensible and rational investors seem to have internalized the idea that crypto “does not operate on conventional rules” and as such, it is OK to ignore what their experience or good sense tells them.
In the case of CoinBene, which purportedly has the largest daily bitcoin trading volume on CoinMarketCap, the scam is transparent – fake a high trading volume, and attract ICO suckers who want to get their sh*tcoin listed on a high volume platform without going through the regulatory processes of say, Coinbase or Gemini. In return for helping them jump the queue, charge them as much as $3 million per listing, and smile to the bank as their sh*tcoin inevitably sinks and eventually turns into a deadcoin. It’s almost like a victimless crime.
Despite CoinBene clearly being a no-name platform compared to the likes of Binance or Kraken, some clearly fell victim to a story that should have been very easy to spot as “too good to be true.” This is unfortunately all too common in the world of crypto, where common sense and Economics are often overlooked out of an irrational sense of optimism.
At the height of the 2017 bull run, for instance, it was not uncommon to see ICO whitepapers promising “at least 500% profit upon listing.” Others guaranteed that token prices would spike as much as 2000 percent and stay there because the ICO promoters would buy back a large portion of the tokens and create artificial scarcity. Ridiculous as these promises look in hindsight, many such projects raised millions of dollars, effectively preying on the naivety of crypto investors.
Satoshi’s bitcoin whitepaper was exactly nine pages long. In it, he described an idea of bitcoin as electronic peer-to-peer cash designed to work as an alternative to centralized fiat currency. Satoshi did not at any point state that bitcoin is intended to radically redefine the entire concept of money, or to supplant the government, or to serve as a survivalist currency at the end of the world. These are ideas that other people have projected onto crypto based on their own vision of what it can or should do.
The trouble with this is that this contributes toward the unique crypto phenomenon where people build elaborate castles in the air based on the assumption that crypto in itself is some kind of magic talisman. It does seem at times as though a sort of pseudo-religion is developing around Crypto, which is vastly unhelpful to the growth and mainstreaming of this technology.
Fraudsters like CoinBene and hundreds of other platforms and projects take advantage of this irrational belief in a ‘crypto God’ to push scams. They do this, secure in the knowledge that unlike in other financial spaces, crypto offers a perfect storm of low regulation, economic and financial illiteracy on the part of many ‘true believers,’ a steady stream of new victims driven by internet lemming culture, and zero consequences for bad behavior.
Maybe it’s time for crypto to grow up and stop thinking it operates outside of the rules that govern everything else.
Last modified: March 4, 2021 3:51 PM