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In finance, an exchange is a forum or platform for trading commodities, derivatives, securities or other financial instruments. The principle concern of an exchange is to allow trading between parties to take place in a fair and legally compliant manner, as well as to ensure that pricing information for any instrument traded on the exchange is reliable and coherently delivered to exchange participants. In the cryptocurrency space exchanges are online platforms that allow users to trade cryptocurrencies or digital currencies for fiat money or other cryptocurrencies. They can be centralized exchanges such a Binance, or decentralized exchanges such as IDEX. Most cryptocurrency exchanges allow users to trade different crypto assets with BTC or ETH after having already exchanged fiat currency for one of those cryptocurrencies. Coinbase and Kraken are the main avenue for fiat money to enter into the cryptocurrency ecosystem.
Function and History
Crypto exchanges can be market-makers that take bid/ask spreads as a commission on the transaction for facilitating the trade, or more often charge a small percentage fee for operating the forum in which the trade was made. Most crypto exchanges operate outside of Western countries, enabling them to avoid stringent financial regulations and the potential for costly and lengthy legal proceedings. These entities will often maintain bank accounts in multiple jurisdictions, allowing the exchange to accept fiat currency and process transactions from customers all over the globe.
The concept of a digital asset exchange has been around since the late 2000s and the following initial attempts at running digital asset exchanges foreshadows the trouble involved in attempting to disrupt the operation of the fiat currency baking system. The trading of digital or electronic assets predate Bitcoin’s creation by several years, with the first electronic trading entities running afoul of the Australian Securities and Investments Commission (ASIC) in late 2004. Companies such as Goldex, SydneyGoldSales, and Ozzigold, shut down voluntarily after ASIC found that they were operating without an Australian Financial Services License. E-Gold, which exchanged fiat USD for grams of precious metals in digital form, was possibly the first digital currency exchange as we know it, allowing users to make instant transfers to the accounts of other E-Gold members. At its peak in 2006 E-Gold processed $2 billion worth of transactions and boasted a user base of over 5 million people.
Here we will give a brief overview of the features and operational history of the more popular and higher volume exchanges because these are the platforms to which newer traders will be exposed. These exchanges are recommended to use because they are the industry standard and they inspire the most confidence.
Owned and operated by iFinex Inc, the cryptocurrency trading platform Bitfinex was the largest Bitcoin exchange on the planet until late 2017. Headquartered in Hong Kong and based in the US Virgin Island, Bitfinex was one of the first exchanges to offer leveraged trading (“Margin trading allows a trader to open a position with leverage. For example — we opened a margin position with 2X leverage. Our base assets had increased by 10%. Our position yielded 20% because of the 2X leverage. Standard trades are traded with leverage of 1:1”) and also pioneered the use of the somewhat controversial, so-called “stable coin” Tether (USDT).
Binance is an international multi-language cryptocurrency exchange that rose from the mid-rank of cryptocurrency exchanges to become the market dominating behemoth we see today. At the height of the late 2017/early 2018 bull run, Binance was adding around 2 million new users per week! The exchange had to temporarily disallow new registrations because its servers simply could not keep up with that volume of business. After the temporary ban on new users was lifted the exchange added 240,000 new accounts within two hours.
Have you ever thought whats the role of the cypto exchanges? The answer is simple! There are several different types of exchanges that cater to different needs within the ecosystem, but their functions can be described by one or more of the following: To allow users to convert fiat currency into cryptocurrency. To trade BTC or ETH for alt coins. To facilitate the setting of prices for all crypto assets through an auction market mechanism. Simply put, you can either mine cryptocurrencies or purchase them, and seeing as the mining process requires the purchase of expensive mining equipment, Cryptocurrency exchanges can be loosely grouped into one of the 3 following exchange types, each with a slightly different role or combination of roles.
Have you ever thought about what are the types of Crypto exchanges?
- Traditional Cryptocurrency Exchange: These are the type that most closely mimic traditional stock exchanges where buyers and sellers trade at the current market price of whichever asset they want, with the exchange acting as the intermediary and charging a small fee for facilitating the trade. Kraken and GDAX are examples of this kind of cryptocurrency exchange. Fully peer-to-peer exchanges that operate without a middleman include EtherDelta, and IDEX, which are also examples of decentralized exchanges.
- Cryptocurrency Brokers: These are website or app based exchanges that act like a Travelex or other bureau-de-change. They allow customers to buy or sell crypto assets at a price set by the broker (usually market price plus a small premium). Coinbase is an example of this kind of exchange.
- Direct Trading Platform: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform in doing so. These types of exchanges do not use a set market rate; rather, sellers set their own rates. This is a highly risky form of trading, from which new users should shy away.
To understand how an exchange functions we need only look as far as a traditional stock exchange. Most all the features of a cryptocurrency exchange are analogous to features of trading on a traditional stock exchange. In the simplest terms, the exchanges fulfil their role as the main marketplace for crypto assets of all kinds by catering to buyers or sellers. These are some definitions for the basic functions and features to know: Market Orders: Orders that are executed instantly at the current market price. Limit Order: This is an order that will only be executed if and when the price has risen to or dropped to that price specified by the trader and is also within the specified period of time. Transaction fees: Exchanges will charge transactions fees, usually levied on both the buyer and the seller, but sometimes only the seller is charged a fee. Fees vary on different exchanges though the norm is usually below 0.75%. Transfer charges: The exchange is in effect acting as a sort of escrow agent, to ensure there is no foul play, so it might also charge a small fee when you want to withdraw cryptocurrency to your own wallet.
Regulatory Environment and Evolution
Cryptocurrency has come a long way since the closing down of the Silk Road darknet market. The idea of crypto currency being primarily for criminals, has largely been seen as totally inaccurate and outdated. In this section we focus on the developing regulations surrounding the cryptocurrency asset class by region, and we also look at what the future may hold.
The United States of America
A coherent uniform approach at Federal or State level has yet to be implemented in the United States. The Financial Crimes Enforcement Network published guidelines as early as 2013 suggesting that BTC and other cryptos may fall under the label of “money transmitters” and thus would be required to take part in the same Anti-money Laundering (AML) and Know your Client (KYC) procedures as other money service businesses. At the state level, Texas applies its existing finance laws. And New York has instituted an entirely new licensing system.
The European Union
The EU’s approach to cryptocurrency has generally been far more accommodating overall than the United States, partly due to the adaptable nature of pre-existing laws governing electronic money that predated the creation of Bitcoin. As with the USA, the EU’s main fear is money laundering and criminality. The European Central Bank (ECB) categorized BTC as a “convertible decentralized currency” and advised all central banks in the EU to refrain from trading any cryptocurrencies until the proper regulatory framework was put in place. A task force was then set up by the European Parliament in order to prevent and investigate any potential money laundering that was making use of the new technology.
Likely future regulations for cryptocurrency traders within the European Union and North America will probably consist of the following proposals: The initiation of full KYC procedures so that users cannot remain fully anonymous, in order to prevent tax evasion and curtail money laundering. Caps on payments that can be made in cryptocurrency, similar to caps on traditional cash transactions. A set of rules governing tax obligations regarding cryptocurrencies Regulation by the ECB of any companies that offer exchanges between cryptocurrencies and fiat currencies It is less likely for other countries to follow the Chinese approach and completely ban certain aspects of cryptocurrency trading. It is widely considered more progressive and wiser to allow the technology to grow within a balanced accommodative regulatory framework that takes all interests and factors into consideration. It is probable that the most severe form of regulation will be the formation of new governmental bodies specifically to form laws and exercise regulatory control over the cryptocurrency space. But perhaps that is easier said than done. It may, in certain cases, be incredibly difficult to implement particular regulations due to the anonymous and decentralized nature of crypto.
Behavior of Cryptocurrency Investors by Demographic
Due to the fact that cryptocurrency has its roots firmly planted in the cryptography community, the vast majority of early adopters are representative of that group. In this section we cover the basic structure of the cryptocurrency market cycle and the makeup of the community at large, as well as the reasons behind different trading decisions.
The Cryptocurrency Market Cycle
Bitcoin leads the bull rally. FOMO (Fear of missing out) occurs, the price surge is a constant topic of mainstream news, business programs cover the story, and social media is abuzz with cryptocurrency chatter. Bitcoin reaches new All Timehigh (ATH) Market euphoria is fueled with even more hype and the cycle is in full force. There is a constant stream of news articles and commentary on the meteoric, seemingly unstoppable rise of Bitcoin. Bitcoin’s price “stabilizes”, In the 2017 bull run this was at or around $14,000. A number of solid, large market cap altcoins rise along with Bitcoin; ETH & LTC leading the altcoins at this time. FOMO comes into play, as the new ATH in market cap is reached by pumping of a huge number of alt coins.
Top altcoins “somewhat” stabilize, after reaching new all-time highs. The frenzy continues with crypto success stories, notable figures and famous people in the news. A majority of lesser known cryptocurrencies follow along on the upward momentum. Newcomers are drawn deeper into crypto and sign up for exchanges other than the main entry points like Coinbase and Kraken. In 2017 this saw Binance inundated with new registrations. Some of the cheapest coins are subject to massive pumping, such as Tron TRX which saw a rise in market cap from $150 million at the start of December 2017 to a peak of $16 billion! At this stage, even dead coins or known scams will get pumped. The price of the majority of cryptocurrencies stabilize, and some begin to retract. When the hype is subsiding after a huge crypto bull run, it is a massive sell signal. Traditional investors will begin to give interviews about how people need to be careful putting money into such a highly volatile asset class. Massive violent correction begins and the market starts to collapse. BTC begins to fall consistently on a daily basis, wiping out the insane gains of many medium to small cap cryptos with it. Panic selling sweeps through the market. Depression sets in, both in the markets, and in the minds of individual investors who failed to take profits, or heed the signs of imminent collapse. The price stagnation can last for months, or even years.
The Influence of Age upon Trading
Did you know? Cryptocurrencies have been called “stocks for millennials” According to a survey conducted by the Global Blockchain Business Council, only 5% of the American public own any bitcoin, but of those that do, an overwhelming majority of 71% are men, 58% of them are between the ages of 18 and 35, and over half of them are minorities. The same survey gauged public attitude toward the high risk/high return nature of cryptocurrency, in comparison to more secure guaranteed small percentage gains offered by government bonds or stocks, and found that 30% would rather invest $1,000 in crypto. Over 42% of millennials were aware of cryptocurrencies as opposed to only 15% of those ages 65 and over. In George M. Korniotis and Alok Kumar’s study into the effects of aging on portfolio management and the quality of decisions made by older investors, they found “that older and experienced investors are more likely to follow “rules of thumb” that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated and earn lower income.”
Geographic Influence upon Trading
One of the main drivers of the apparent seasonal ebb and flow of cryptocurrency prices is the tax situation in the various territories that have the highest concentrations of cryptocurrency holders. Every year we see an overall market pull back beginning in mid to late January, with a recovery beginning usually after April. This is because “Tax Season” is roughly the same across Europe and the United States, with the deadline for Income tax returns being April 15th in the United States, and the tax year officially ending the UK on the 6th of April. All capital gains must be declared before the window closes or an American trader will face the powerful and long arm of the IRS with the consequent legal proceedings and possible jail time. Capital gains taxes around the world vary from jurisdiction to jurisdiction but there are often incentives for cryptocurrency holders to refrain from trading for over a year to qualify their profits as long term gain when they finally sell. In the US and Australia, for example, capital gains are reduced if you bought cryptocurrency for investment purposes and held it for over a year. In Germany if crypto assets are held for over a year then the gains derived from their sale are not taxed. Advantages like this apply to individual tax returns, on a case by case basis, and it is up to the investor to keep up to date with the tax codes of the territory in which they reside.
2013 Bull run vs 2017 Bull run price Analysis
In late 2016 cryptocurrency traders were faced with the task of distinguishing between the beginnings of a genuine bull run and what might colorfully be called a “dead cat bounce” (in traditional market terminology). Stagnation had gripped the market since the pull-back of early 2014. The meteoric rise of Bitcoin’s price in 2013 peaked with a price of $1,100 in November 2013, after a year of fantastic news on the adoption front with both Microsoft and PayPal offering BTC payment options. It is easy to look at a line going up on a chart and speak after the fact, but at the time, it is exceeding difficult to say whether the cat is actually climbing up the wall, or just bouncing off the ground. Here, we will discuss the factors that gave savvy investors clues as to why the 2017 bull run was going to outstrip the 2013 rally. Hopefully this will help give insight into how to differentiate between the signs of a small price increase and the start of a full scale bull run. Most importantly, Volume was far higher in 2017. As we can see in the graphic below, the 2017 volume far exceeds the volume of BTC trading during the 2013 price increase. The stranglehold MtGox held on trading made a huge bull run very difficult and unlikely.
Fraud & Immoral Activity in the Private Market
Ponzi Schemes Cryptocurrency Ponzi schemes will be covered in greater detail in Lesson 7, but we need to get a quick overview of the main features of Ponzi schemes and how to spot them at this point in our discussion. Here are some key indicators of a Ponzi scheme, both in cryptocurrencies and traditional investments: A guaranteed promise of high returns with little risk. Consistentflow of returns regardless of market conditions. Investments that have not been registered with the Securities and Exchange Commission (SEC). Investment strategies that are a secret, or described as too complex. Clients not allowed to view official paperwork for their investment. Clients have difficulties trying to get their money back. The initial members of the scheme, most likely unbeknownst to the later investors, are paid their “dividends” or “profits” with new investor cash. The most famous modern-day example of a Ponzi scheme in the traditional world, is Bernie Madoff’s $100 billion fraudulent enterprise, officially titled Bernard L. Madoff Investment Securities LLC. And in the crypto world, BitConnect is the most infamous case of an entirely fraudulent project which boasted a market cap of $2 billion at its peak.
What are the Exchange Hacks?
The history of cryptocurrency is littered with examples of hacked exchanges, some of them so severe that the operation had to be wound up forever. As we have already discussed, incredibly tech savvy and intelligent computer hackers led by Alexander Vinnik stole 850000 BTC from the MtGox exchange over a period from 2012–2014 resulting in the collapse of the exchange and a near-crippling hammer blow to the emerging asset class that is still being felt to this day. The BitGrail exchange suffered a similar style of attack in late 2017 and early 2018, in which Nano (XRB) was stolen that was at one point was worth almost $195 million. Even Bitfinex, one of the most famous and prestigious exchanges, has suffered a hack in 2016 where $72 million worth of BTC was stolen directly from customer accounts.
Hardware Wallet Scam Case Study
In late 2017, an unfortunate character on Reddit, going by the name of “moody rocket” relayed his story of an intricate scam in which his newly acquired hardware wallet was compromised, and his $34,000 life savings were stolen. He bought a second hand Nano ledger into which the scammers own recover seed had already been inserted. He began using the ledger without knowing that the default seed being used was not a randomly assigned seed. After a few weeks the scammer struck, and withdrew all the poor HODLer’s XRP, Dash and Litecoin into their own wallet (likely through a few intermediary wallets to lessen the very slim chances of being identified).
Hardware Wallet Scam Case Study Social Media Fraud
Many gullible and hapless twitter users have fallen victim to the recent phenomenon of scammers using a combination of convincing fake celebrity twitter profiles and numerous amounts of bots to swindle them of ETH or BTC. The scammers would set up a profile with a near identical handle to a famous figure in the tech sphere, such as Vitalik Buterin or Elon Musk. And then in the tweet, immediately following a genuine message, follow up with a variation of “Bonus give away for the next 100 lucky people, send me 0.1 ETH and I will send you 1 ETH back”, followed by the scammers ether wallet address. The next 20 or so responses will be so-called sockpuppet bots, thanking the fake account for their generosity. Thus, the pot is baited and the scammers can expect to receive potentially hundreds of donations of 0.1 Ether into their wallet. Many twitter users with a large follower base such as Vitalik Buterin have taken to adding “Not giving away ETH” to their username to save careless users from being scammed.
It also must be recognized that market manipulation is taking place in cryptocurrency. For those with the financial means i.e. whales, there are many ways in which to control the market in a totally immoral and underhanded way for your own profit. It is especially easy to manipulate cryptos that have a very low trading volume. The manipulator places large buy orders or sell walls to discourage price action in one way or the other. Insider trading is also a significant problem in cryptocurrency, as we saw with the example of blatant insider trading when Bitcoin Cash was listed on Coinbase.
Examples of ICO Fraudulent Company Behavior
In the past 2 years an astronomical amount of money has been lost in fraudulent Initial Coin Offerings. The utmost care and attention must be employed before you invest. We will cover this area in greater detail with a whole lesson devoted to the topic. However, at this point, it is useful to look at the main instances of ICO fraud. Among recent instances of fraudulent ICOs resulting in exit scams, 2 of the most infamous are the Benebit and PlexCoin ICOs which raised $4 million for the former and $15 million for the latter. Perhaps the most brazen and damaging ICO scam of all time was the Vietnamese Pincoin ICO operation, where $660million was raised from 32,000 investors before the scammer disappeared with the funds. In case of smaller ICO “exit scamming” there is usually zero chance of the scammers being found. Investors must just take the hit. We will cover these as well as others in Lesson 7 “Scam Projects”.
Signposts of Fraudulent Actors
The following factors are considered red flags when investigating a certain project or ICO, and all of them should be considered when deciding whether or not you want to invest. Whitepaper is a buzzword Salad: If the whitepaper is nothing more than a collection of buzzwords with little clarity of purpose and not much discussion of the tech involved, it is overwhelmingly likely you are reading a scam whitepaper.
Signposts of Fraudulent Actors §2
No Code Repository: With the vast majority of cryptocurrency projects employing open source code, your due diligence investigation should start at GitHub or Sourceforge. If the project has no entries, or nothing but cloned code, you should avoid it at all costs. Anonymous Team: If the team members are hard to find, or if you see they are exaggerating or lying about their experience, you should steer clear. And do not forget, in addition to taking proper precautions when investing in ICOs, you must always make sure that you are visiting authentic web pages, especially for web wallets. If, for example, you are on a spoof MyEtherWallet web page you could divulge your private key without realizing it and have your entire portfolio of Ether and ERC-20 tokens cleaned out.
Methods to Avoid falling Victim
Avoiding scammers and the traps they set for you is all about asking yourself the right questions, starting with: Is there a need for a Blockchain solution for the particular problem that a particular ICO is attempting to solve? The existing solution may be less costly, less time consuming, and more effective than the proposals of a team attempting to fill up their soft cap in an ICO. The following quote from Mihai Ivascu, the CEO of Modex, should be kept in mind every time you are grading an ICO’s chances of success: “I’m pretty sure that 95% of ICOswill not last, and many will go bankrupt. ….. not everything needs to be decentralized and put on an open source ledger.”
Methods to Avoid falling Victim §2 Do I Trust These People with My Money, or Not?
If you continue to feel uneasy about investing in the project, more due diligence is needed. The developers must be qualified and competent enough to complete the objectives that they have set out in the whitepaper.
Is this too good to be true?
All victims of the well-known social media scams using fake profiles of Vitalik Buterin, or Bitconnect investors for that matter, should have asked themselves this simple question, and their investment would have been saved. In the case of Bitconnect, huge guaranteed gains proportional to the amount of people you can get to sign up was a blatant pyramid scheme, obviously too good to be true. The same goes for Fake Vitalik’s offer of 1 ether in exchange for 0.1 ETH.
Selling Cryptocurrencies, Several reasons for selling with the appropriate actions to take:
If you are selling to buy into an ICO, or maybe believe Ether is a safer currency to hold for a certain period of time, it is likely you will want to make use of the Ether pair and receive Ether in return. Obviously if the ICO is on the NEO or WANchain blockchain for example, you will use the appropriate pair. -Trading to buy into another promising project that is listing on the exchange on which you are selling (or you think the exchange will experience a large amount of volume and become a larger exchange), you may want to trade your cryptocurrency for that exchange token. -If you believe that BTC stands a good chance of experiencing a bull run then using the BTC trading pair is the suitable choice. -If you believe that the market is about to experience a correction but you do not want to take your gains out of the market yet, selling for Tether or “tethering up” is the best play. This allows you to keep your locked-in profits on the exchange, unaffected by the price movements in the cryptocurrency markets,so that you can buy back in at the most profitable moment. -If you wish to “cash out” i.e. sell your cryptocurrency for fiat currency and have those funds in your bank account, the best pair to use is ETH or BTC because you will likely have to transfer to an exchange like Kraken or Coinbase to convert them into fiat. If the exchange offers Litecoin or Bitcoin Cash pairs it could be a good idea to use these for their fast transaction time and low fees.
Knowing when and how to sell, as well as strategies to inflate the value of your trade before sale, are important skills as a trader of any product or financial instrument. If you are satisfied that the sale itself of the particular amount of a token or coin you are trading away is the right one, then you must decide at what price you are going to sell. Exchanges exercise their own discretion as to which trading “pairs” they will offer, but the most common ones are BTC, ETH, BNB for Binance, BIX for Bibox etc., and sometimes Tether (USDT) or NEO. As a trader, you decide which particular cryptocurrency to exchange depending on your reason for making that specific trade at that time.
Methods of Sale
Market sell/Limit sell on exchange: A limit sell is an order placed on an exchange to sell as soon as (also specifically only if and when) the price you specified has been hit within the time limit you select. A market order executes the sale immediately at the best possible price offered by the market at that exact time. OTC (or Over the Counter) selling refers to sale of securities or cryptocurrencies in any method without using an exchange to intermediate the trade and set the price. The most common way of conducting sales in this manner is through LocalBitcoins.com. This method of cryptocurrency selling is far riskier than using an exchange, for obvious reasons.
The influence and value of your Trade
There are a number of strategies you can use to appreciate the value of your trade and thus increase the Bitcoin or Ether value of your portfolio. It is important to disassociate yourself from the dollar value of your portfolio early on in your cryptocurrency trading career simply because the crypto market is so volatile you will end up pulling your hair out in frustration following the real dollar money value of your holdings. Once your funds have been converted into BTC and ETH they are completely in the crypto sphere. (Some crypto investors find it more appropriate to monitor the value of their portfolio in satoshi or gwei.) Certainly not limited to, but especially good for beginners, the most reliable way to increase your trading profits, and thus the overall value and health of your portfolio, is to buy into promising projects, hold them for 6 months to a year, and then reevaluate. This is called Long term holding and is the tactic that served Bitcoin HODLers quite well, from 2013 to the present day. Obviously, if something comes to light about the project that indicates a lengthy set back is likely, it is often better to cut your losses and sell. You are better off starting over and researching other projects. Also, you should set initial Price Points at which you first take out your original investment, and then later, at which you take out all your profits and exit the project. That should be after you believe the potential for growth has been exhausted for that particular project.
Another method of increasing the value of your trades is ICO flipping. This is the exact opposite of long term holding. This is a technique in which you aim for fast profits taking advantage of initial enthusiasm in the market that may double or triple the value of ICO projects when they first come to market. This method requires some experience using smaller exchanges like IDEX, on which project tokens can be bought and sold before listing on mainstream exchanges. “Tethering up” means to exchange tokens or coins for the USDT stable coin, the value of which is tethered to the US Dollar. If you learn, or know how to use, technical analysis, it is possible to predict when a market retreatment is likely by looking at the price movements of BTC. If you decide a market pull back is likely, you can tether up and maintain the dollar value of your portfolio in tether while other tokens and coins decrease in value. The you wait for an opportune moment to reenter the market.
Market Behavior in Different Time Periods
The main descriptors used for overall market sentiment are “Bull Market” and “Bear Market”. The former describes a market where people are buying on optimism. The latter describes a market where people are selling on pessimism. Fun (or maybe not) fact: The California grizzly bear was brought to extinction by the love of bear baiting as a sport in the mid 1800s. Bears were highly sought after for their intrinsic fighting qualities, and were forced into fighting bulls as Sunday morning entertainment for Californians. What has this got to do with trading and financial markets? The downward swipe of the bear’s paws gives a “Bear market” its name and the upward thrust of a Bull’s horns give the “Bull Market” its name. Most unfortunately for traders, the bear won over 80% of the bouts. During a Bull market, optimism can sometimes grow to be seemingly boundless, volume is rising, and prices are ascending. It can be a good idea to sell or rebalance your portfolio at such a time, especially if you have a particularly large position in one holding or another. This is especially applicable if you need to sell a large amount of a relatively low-volume holding, because you can then do so without dragging the price down by the large size of your own sell order.
Learn more on common behavioral patterns observed so far in the cryptocurrency space for different coins and ICO tokens.
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http://shitco.in/2015/07/25/the-wuestenrote-wusitanluo-ltc-ponzi-was-crushed/ submitted by
Images in post:
With yesterday’s LTC pump, many traders have been talking about the possibility of another moonshot. In our experience, group think generally should be approached with caution, and traders should sort out the facts on their own before making any moves. With the possibility of making or losing a significant amount of money in the game of ltc hot potato, we decided to dig a bit deeper into the “Chinese Ponzi” that we outlined in this post.
Unfortunately, for traders, it looks like the fun might be over for the time being. It appears as if the suspected ponzi actually was a ponzi, and the people who were running it incurred massive losses and are now on the run. With over 400,000 ltc still in this address, we wonder what their next move will be. Without the upwards pressure of the ponzi on LTC, will the market collapse, or will other pumpers come in to take advantage of the hype around the block halving.
The first piece of information to focus on, this post from the group themselves which was made on July 22nd. We understand that it is a bit hard to read, but that’s Google Translate’s fault. You can easily get the idea of what is going/went on, and it isn’t good.
Wusitanluo Network Announcement: Dear coins circle and investors you are good: Since litecoin great investment value, recently sought after by the market, trading activity, rising rapidly. Frequent exchange transactions across multiple platforms, leading after the rapid rise, some investors eager to cash in quickly after frequent cause is thrown down. The company has been the case of the parties conducted a survey research, set up an investigation team for the entire event carried out a detailed investigation. The occurrence of such a huge market fluctuations things, on behalf of the company for failing to deal promptly remind investors of risk and get the best revenue opportunities, deeply apologize! The company will serve as a reminder that in the future the investment process, to better improve service, increase opportunities and investor communications, increase litecoin trading knowledge training. However miss this opportunity, as well as heavy losses to investors caused by currency circle, we must acknowledge the error, it is wrong leadership of the company, things have happened, companies know that no amount of explanation is useless, only adjusted for market development at the same time in favor of the interests of investors all litecoin program. So please rest assured that the majority of investors! The existence of the event management problems, the company to extend my most sincere apologies to the members. About uproar MLM event Wusitanluo litecoin recent online fund transfer, the company made the following explanation: 1. litecoin – digital currency in silver, five national ministries issued a document has acknowledged the same nature of virtual currency and stamp investment products; The company did was to maximize the benefits to our own members, members to participate in the store come in the company to do buy low sell credits for the company and members of the benefit, but after the incident that we deeply appreciate the company’s promotion and incentives does have loopholes, the company is now working on improvements, will be promptly corrected, and safeguard the interests of members and coins circle stable and sustainable development. Increase the propaganda and investor training instructions explain litecoin development environment, the company operating conditions, so that investors from different sectors of society, we have a full understanding, differentiate the company is definitely not an illegal pyramid scheme organizations and other institutions. If the company deliberately fraud, no company disclosed the truth, so please credits circle of investors and members of my friends believe that: The company will gradually improve the business long-term orderly and healthy development continues! The problem for business, we reflect on the comprehensive, currency experts gathered in the circle, the company’s practitioners admire your moral and technical level, you who are veterans, we circle the deficiencies currency, please timely corrected, we would like to fully cooperate for the greatest degree of meeting customer requirements, to achieve a win-win, and let us improve faster. We are willing and credits between companies in the same industry circles to establish a good cooperative relationship; analysis of everyone’s long-term sustainable development of a steady stream of money to bring new impetus to the development circle, currency prices rose only virtual currency using the procedure we have developed a necessary process, we increase investment late, modify extension model allows the company to achieve a virtuous cycle, please rest assured! Since the 7.10 incident currency Circle in short Zapan cause our losses, we make the following summary: We have never experienced such an event, there is no ability to timely response and to corporate clients who bring serious losses, our market environment is too optimism did not adjust the tempo. About Wright currency fluctuations, we realized: favorable currency price rises for everyone; short only on a small part of speculators to bring short-term profit, most investors can not share the real benefits brought by the development of virtual currency. Many people even do not know the risks of leverage, resulting in greater losses! So our next step will be an effective and mutually beneficial and win-win to stay in business, please credits circle of colleagues and jointly create a harmonious market environment, maintaining good litecoin healthy development is our responsibility! Here, also deeply grateful to all of concerned friends! In fact, the company was informed that after the incident, in addition to feel very ashamed and apologetic outside, but also gain a more moving and trust, thank the majority of investors have high hopes for the company! The future development of the company, and we closely co-prosperity loss, we already are familiar with the family, so I can better understand that you do not want us to make mistakes in their mood. You were criticized, is the driving force of the company can do better! We will gradually consolidate the business, scientific management company’s business development, allowing companies to develop more robust! & Nbsp; & nbsp; Our company is totally worth everyone has the strength to believe, as the new company litecoin industry, the company has a very strong economic and technical support. Business is like a child, growing up, will inevitably wrestling, make mistakes, then the parents will help one, carefully educate him. The company today, you need to like the parents who help a help, what help us to grow up healthy and strong! & Wusitanluo network announcement!
Secondary Source: BTCMan
Further on in the thread, information about the supposed leaders is posted, along with their pictures.
Screen Shot 2015-07-25 at 4.31.23 PMScreen Shot 2015-07-25 at 4.32.10 PMThe Chinese BTC media had been covering the story since earlier in July, more information below:
July 10, 2015, Wright currency prices from a month ago, hovering at 11 yuan, skyrocketing to 54 yuan, or nearly 400%. Investigate its soaring reason, most likely related to a strong sales organization suspected of pulling the disc. After the litecoin surge stirred the entire digital currency industry, in July 2015 at 10pm, litecoin suddenly began to fall from 54 yuan, as of press time, litecoin prices hovering at 27 yuan from top to bottom. The previous day’s surge, probably only because a video. Reporter join MLM organizations suspected of QQ group: Wusitanluo – litecoin Just one day time, group number rose to 435 from 100 people up and down, and still keep up the trend. A large group of files named “Wusitanluo litecoin Fund Projects” “litecoin registration process” file. Suspected MLM organizations to promote PPT Wusitanluo litecoin Fund Project Description: 1, sentence description of the project The project requires investors to the market on their own (fire credits net) at market price to buy 500 litecoin, then 500 litecoin Wusitanluo to finance and investment companies, the company returned to 3 per day to 5 litecoin to your virtual currency wallet (fast purse), now return 5, after deducting 10% of the fee actual return 4.5, can be returned litecoin fire credits net trading cash to be held currency to be up. Note: The contract with the company for 1 year 500 litecoin to the company of the night (the next morning) the return of the company will be able to receive 4.5 credits litecoin is the world’s second largest virtual currency, in China there are 12 exchanges of fire most traded currency net . Fast is the most secure virtual wallet purse money, safe, convenient and compatible bitcoin 2, to help companies to promote Award A, all of their recommended straight people can get 50% per person per day B, straight recommended 10 people became broker (also available in their 5500 litecoin buy directly into the broker) C, will become a broker, obtain the following rewards: 1–5 dezh dividend of 10% 5% dividend 6–10 dezh 11–15 dezh dividend of 2% Note: Direct Push 1 get 2nd generation, direct push two people have two generations, direct push three people have three generations, so get up to 15 generations, every day, every day the dividend, too. Your income = ROI + Promotion Rewards 3, Wusitanluo is a German company, is a diversified financial conglomerate, located at 1156 Forbes Global 2014 companies list, ranked 37 in Germany. 4. What is Wusitanluo litecoin fund? International litecoin profitable global trading platform to buy low and sell high 5, this model is MLM it? Your investment in a first, the company received on time if you return the money, proved to be true in the future, who would you most like to pass? You most certainly would like to vote on several accounts under his first order to obtain greater benefits. Their investments much more income than pull people to join. 6, there is no risk of such an investment? Any investment has risk, but in this era of fast money, to get the maximum benefit is to grasp the opportunity in the short term. 7, was asked: I do not know you, money is how do you cheated? A: You are mistaken, your money and coins not through my hand, you buy 500 litecoin litecoin directly with your wallet (fast purse) to call the company, I just recommend you to join it, you register Corporate Member When I will use my membership number. Being thought of these, to be fleshed out later! Other issues your own Baidu, Baidu Post Bar has Wusitanluo it. This is the latest investment projects, domestic just beginning, very few people do this, have not formed a team like Vicat currency, seize the opportunity to put their achievements as Vicat currency render such a successful teacher. I am determined to do Wusitanluo first person in China, of course, you can also set up their own team, beyond their own!
OKCoin has been aware of the situation since at least July 11th, but has only made a full statement (that we could find) to their Chinese customers. I.e.: Something that said more than “don’t put yourself in traps”.
They also mention that this is just the latest of their investment projects, and the beginning of domestic projects. What does this mean? We suspect that they may have lost a substantial amount of funds due to their failed pump, and aren’t too convinced that there will be subsequent pumps yet. If anything, we would expect the market to deflate a bit while the ponzi tries to get things back in line, but do they have the buying power to pull themselves out from underwater.
These ponzi masters have gone so far as to imitate a German company, register the .com version of their domain name and put up a fake website in order to cover their tracks.
The companies correct website is: https://www.wuestenrot.de/
The fraud site was: https://www.wuestenrote.com/
Again, from 8btc:
Germany seems to really have the online search Wusitanluo this company, also great. However, and this litecoin MLM is certainly nothing to do. This is the MLM websites http://www.wuestenrote.com/ . In million net Search Domain Information: Oh, April 10, 2015 was registered. However, some people may say is to not promote litecoin MLM ah, ah just registered! ! I continue to dig. The bigger sites do actually quite bluffing. For example, the login screen can select the language. Very fast hardware thing, after all, is large international companies! But I chose English actually let me choose it, people look down on the Asia-Pacific do not know English? ? ! ! Then I see the website source. Develop people to effortlessly Reprogramming a German and English pages, when you want to change the English and German pop up directly not to change! Yes, it is a direct pop, will not determine the country where ip oh ~
A Baidu thread with the ponzi “founders”, shows they have a very creative way of looking at what they are doing.
Screen Shot 2015-07-25 at 5.59.13 PM Screen Shot 2015-07-25 at 5.58.36 PM Screen Shot 2015-07-25 at 5.57.59 PMWe then turned to bitcointalk for information, and found plenty. Here is the most interesting and informative thread: http://translate.google.com/translate?hl=en&sl=zh-CN&u=https://bitcointalk.org/index.php%3Ftopic%3D1126935.0&prev=search
You can view a video of the schemers promoting here – http://v.qq.com/covel/l9njr6tdhnl6nl2.html?vid=a0159sgq8mp
And for those of you wishing to see the ponzi schemer’s presentation (source):
123456789101112131415161718192021222325So what do we expect from here? Probably a ltc dump as this news propagates through the west, and traders realize that might be bag hodling for a while. If the ponzi group or another pump team step back into the market place though, we could be in for a wild ride.
The bottom line is that the ponzi pump team didn’t execute their pump as expected, and it appears as if they are now on the run after incurring massive losses. Whether this is true, or FUD to get the ltc price back to a level where they can buy back in and pump is to be seen. With the upcoming block halving, and OKC double witching in September, we have some dates on our calendar to watch.
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