Cryptocurrency Exchanges and Their Leaders: An Industry Paradox?

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Source: Tech Bullion

Learning Objectives

· To investigate the role that cryptocurrency exchanges have on the industry.

· To investigate the potential influence that cryptocurrency exchange leaders have over the wider cryptocurrency community.

· To draw conclusion on how one must recognise falsified information from organic, and how to use this to your benefit.


Cryptocurrency exchanges are platforms that allow cryptocurrency assets to be traded live on a 24/7 worldwide market. Similar to the assets being traded, cryptocurrency exchanges come in the form of being centralised or decentralised, both of which allow the conversion of fiat to / from cryptocurrency, along with the conversion of a variety of cryptocurrency pairs.

Cryptocurrency exchanges are largely unregulated, yet are currently the backbone of any financial trading in the industry. This presents an issue that is often fiercely debated on social media and is a hot topic in many discussions. One word, manipulation!

The leaders of these cryptocurrency exchanges (in particular the most successful exchanges) can often come across as being captivating characters of the industry, willing to help the “little people” make their fortune. This presents another passionate topic of debate, are these leaders being just? Or, are they in fact playing a character while carrying out their profitable business plans right under the nose of, and at the expense of, the “little people”?

This article will aim to investigate the practices of cryptocurrency exchanges and their leaders, with an aim of drawing conclusions on their role within the industry.

Main Body

To begin the research element of this article, the first thing to note that this article is not aimed at simply condemning exchanges, moreover, it is to investigate an alternative view from a balanced approach. Whether people like it or not, cryptocurrency exchanges will have a role to play in the “craved” process of mass adoption, that cryptocurrency loyalists seek. We would also not be able to trade cryptocurrencies so freely without exchanges, so this should always be respected.

In the week of writing this article, Coinbase announced the launch of a new Visa debit card to customers the UK. This will facilitate making purchases and cash withdrawals directly from the user’s cryptocurrency accounts. Although I have yet to see any confirmation on fees, this must surely be seen a small, but hugely positive step in the right direction.

Source: Coindesk

Further happenings this week has also seen Changpeng Zhao (CZ), (founder and CEO of the world’s largest cryptocurrency exchange by trading volume named Binance), being credited after releasing a tweet defending Sue Hodlonaut after she received a letter threatening libel from Craig Wright. This has largely united the online cryptocurrency community, and seen many change their avatars in support of this movement.

Source: Twitter

Both exchanges have received widespread commendation for those actions this week.

Now onto the “nitty-gritty”!

Pump and Dumps

A pump-and-dump scheme can be summarised as a type of fraudulent activity whereby offenders accumulate a commodity, stock or cryptocurrency over a period of time. Misinformation is then spread to artificially inflate the price, known as pumping. The rise in price attracts unsuspecting buyers to buy into the commodity, stock or cryptocurrency. The offenders then sell off at this higher price, known as dumping.

Cryptocurrency exchanges have long been accused by many as facilitators of pump and dump schemes. In October 2018, a small Russia-based cryptocurrency exchange named YoBit, openly announced on Twitter that it was going to pump random coins.

Source: Twitter

It was Yobit’s intention to dump on the people who were willing to buy into the coins, after they are pumped. It is unclear how many people were affected by this unscrupulous scheme, given that they announced it so blatantly. They even put a countdown timer on their exchange until the pump was starting to commence!

Source: YoBit

Although it would be ludicrous to think that anyone would be naïve to get involved in something so openly shameless, it has come to the disappointment of many that these types of activities happen so freely.

A less dubious but equally controversial concept is when new coins disproportionately pump when listed on exchanges. This often sees the coins price inflate by hundreds of percent in a very short time period after the listing.

During the month of April 2019, Binance listed Fetch (FET) and Celer Network (CELR) to their exchange. This saw the price of these ICOs substantially inflate followed by an equally dramatic dump.

Source: Trading View

Source: Trading View

It is also worth noting that both of these ICOs raised around 4–5 million dollars each, while Binance Coin (BNB) simultaneously pumped on the name of Binance launchpad and added almost a billion dollars in market cap in those few weeks.

Source: Twitter

This could be nothing more than a coincidence, but it could also be a planned scheme to maximise financial return for those on the “inside”. What are your thoughts on this?

Market Manipulation

Forms of corruption in day to day stock market trading is not something that will come as a surprise to many outsiders. For example, the well-publicised LIBOR scandal which made mainstream news in 2014, used a method called wash trading. This is an illegal type of trading in which a broker and trader collude to make profits by feeding misleading information to the market.

Cryptocurrency exchanges have long been accused of wash trading to create false volume on coin. This is another method that could be used to facilitate pump and dumps, as discussed in the last chapter.

In February 2019, Tokens (MCO) were trading at approximately $2.10 rocketing to a high of $2.97 by the very next day.

Source: Crypto Briefing

The trading activity of Token (MCO) was even more suspicious, going $3M to $174M in two days. A disproportionate amount of this volume valued at $83M at current prices, came exclusively from Bit-Z’s MCO/BTC trading pair. This accounted for 80% of the total volume.

There were no significant project developments or statement releases by Token (MCO) during this short time period. It is a small market cap coin in terms of value, and these are easier to manipulate with regard to price and volume. This example is likely to have been an instance of wash trading. It is worth noting that this engineered mechanism is illegal.

Suspicion of Insider Trading

Insider trading is the trading of a publicly traded company’s stock or securities by an individual or group who has non-public information about that stock. It is dependent on the specific case as to whether the inside trade is illegal, with factors such as the time of trade or the country that it took place being relevant. It is often illegal when material information remains non-public but is acted upon in this way.

Coinbase has been surrounded by insider trading allegations for some time. In October 2018 the exchange was taken to court, though cleared of any wrong doing, over alleged insider trading during its launch of Bitcoin Cash (BCH) in 2017.

Source: Forbes

Bitcoin Cash (BCH) was launched on the 19th December 2017, however there was a tweet by an anonymous account that was already aware of the information and referenced having inside information from a member of the Coinbase team, only from one day earlier. The value went from circa $1k to $8k within one hour.

Source: Forbes

Although at this point in time, the allegations made against Coinbase have been legally disproven in a court of law, the uncertainties within the cryptocurrency community have yet to diminish. Coinbase announced the listing of XRP on their Coinbase Pro trading exchange on Monday 25th February 2019. Approximately four hours prior to the listing XRP’s price inflated roughly 3.5%. This did not go unnoticed and was raised by prominent members of the cryptocurrency community on social media.

Source: Twitter

Coinbase subsequently acted to carry out an internal investigation into its employees on the matter of insider trading, however the investigation yielded no evidence of wrongdoing.

Many remain unconvinced on the subject of insider trading.

Tactical and Persuasive Marketing by Exchanges

It cannot be disputed that the leaders behind the most significant cryptocurrency exchanges are intelligent people. They have built empires worth billions of dollars in only a few years and control a substantial amount of the market. It is very apparent that the likes of Brian Armstrong (Coinbase) and CZ (Binance) are set on seeking to gain the controlling share of power in the world of cryptocurrency.

Cryptocurrency has shown that in a very small space of time the wealth and influence that one could gain is close to being unprecedented. Some of the believers of cryptocurrency often hang on every word that is spoken from the likes of powerful figureheads such as Brian Armstrong and CZ, however, should these be challenged?

CZ and / or the team at Binance employ a simple but effective social media marketing strategy, whereby they utilise popular female Twitter accounts with large followings, to promote Binance. I am unsure if this is paid promotional work as I have yet to see it stated anywhere, though from viewing it logical it could also be unpaid. It would not be unusual for some females to be attracted to a billionaire male figurehead, in a largely male dominated industry. It would also not be uncommon for a larger amount of the male community to follow popular and often attractive female accounts. This creates the vehicle that Binance required to get their message out to a wider selection of people, in a shorter space of time, keeping ahead of their competition. One would have to appreciate this as being a very clever marketing tactic indeed, if this was the intention of course!

Source: Twitter

Source: Twitter

Source: Twitter


Cryptocurrency exchanges and their leaders are in no doubt an integral part of the market and will play some part in the assistance of meaningful mainstream cryptocurrency adoption. The most powerful of these leaders have rose in fame in a short time span, and as the market is speculative, how many people do you think have had to lose out in order for them to gain their billons of dollar empires? It is highly unlikely that this fortune has been gained from charging trading fees and coin listing fees alone.

The wider cryptocurrency community would likely appreciate some further transparency from exchanges and their leaders. This would especially be beneficial when judging activities that appear dubious from the outside looking in, though this is doubtful to happen anytime soon. After all, the leaders have no pressure or urgency into doing so at this time. The debate on regulation (for another article) is something that splits the community, but it is a factor that would make these businesses reconsider before entering into blatant abuses of power.

“If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing.” (Henry Kravis)

Closing Statement by The Author

My work is totally free and is to provide credible sources to help others. If you appreciate the time I have spent and would like to make a gesture of goodwill donation, see my cryptocurrency wallet address below:

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Thank you for your time and I hope that you gained something valuable from this article.

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