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The CFTC’s action against Gemini is bad news for Bitcoin ETFs

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The CFTC’s action against Gemini is bad news for Bitcoin ETFs

On June 2, 2022, the United States Commodity Futures Trading Commission (CFTC) initiated an action against Gemini, the crypto exchange founded by billionaire twins Tyler and Cameron Winklevoss. Among other things, the complaint alleges that Gemini made a number of false and misleading statements to the CFTC in connection with the potential self-certification of a Bitcoin futures contract, the prices for which were to be settled daily by an auction (the “Gemini Bitcoin Auction”). In the complaint, the CFTC specifically articulated the position that these statements were designed to mislead the commission as to whether the proposed Bitcoin futures contract would be susceptible to manipulation.

While the Winklevoss brothers were not named in the suit, the complaint alleges that “Gemini officers, employees and agents […] knew or reasonably should have known that the statements and information conveyed or omitted […] were false or misleading.” These are serious accusations, considering that CFTC’s third and twelfth core principles require markets involved in derivative trading, including those seeking to offer Bitcoin futures contracts, to have policies and practices ensuring that “contracts [are] not readily subject to manipulation” and that they offer reasonable “protection of market participants.”

Gemini offered a formal statement in response to the CFTC’s action:

“We have an eight-year track record of asking for permission, not forgiveness, and always doing the right thing. We look forward to definitively proving this in court.”

The response from the founding twins, however, was somewhat less professional. Cameron Winklevoss tweeted:

I might respond to this nonsense when I have some free time. But I dunno, maybe not, we’ll see. I’m pretty busy at the moment. For now, any extra time I have I will use to see Top Gun Maverick. I heard it’s awesome!https://t.co/DJwZXQT3EB

— Cameron Winklevoss (@cameron) June 2, 2022

It’s too bad that Gemini’s founders are not taking the suit more seriously. The ramifications of this potentially true fraud may not be limited to any penalties assessed against Gemini by the courts, but also significantly impact the entire industry.

Related: What has been standing in the way of a pure-Bitcoin ETF?

What is the relationship between this action and Bitcoin ETFs?

The lawsuit against Gemini is not about an exchange-traded fund (ETF), it is about representations made in connection with a particular Bitcoin futures contract. It is also not being brought by the U.S. Securities and Exchange Commission, which has been holding out on approving a large and growing number of Bitcoin ETF proposals. It is, however, about potential manipulation in the crypto markets.

The SEC’s record of declining to approve any spot-market Bitcoin ETF has been consistent on two fronts: To date, no Bitcoin ETFs in the spot or physical markets (as opposed to Bitcoin Futures ETFs) have been approved, and so far, the consistently expressed concern of the SEC is that Bitcoin pricing is too subject to manipulation to approve a Bitcoin ETF. Without approval by the SEC, securities exchanges cannot trade the proposed products, which do not fit well under traditional guidelines on what kinds of interests can be sold on a securities exchange.

Admittedly, the SEC recently approved a limited number of Bitcoin Futures ETFs, including two under the same rule that those proposing Bitcoin ETFs in the spot markets are relying on. In part, the SEC relied on the CFTC’s determination that Bitcoin Futures ETFs could be listed on CFTC-regulated exchanges. As part of the CFTC’s process, that agency requires self-certification that the new product complies with CFTC regulations and is “not readily susceptible to manipulation.” In very general terms, the SEC has concluded that these Bitcoin Futures ETFs are protected against manipulation enough to justify allowing their trade on securities exchanges.

The current action against Gemini arises out of conduct that allegedly occurred in 2017 and 2018, when the CFTC was evaluating the Gemini Bitcoin Auction (just after the SEC denied a request from the Winklevoss brothers seeking SEC approval for a Bitcoin ETF). The very fact that a major U.S. crypto exchange that positions itself as having a record of regulatory compliance appears to have been lying in its communication with regulators further bolsters the SEC view that crypto markets are rife with fraud and subject to manipulation, and therefore, that we are not ready for Bitcoin ETFs.

Related: VanEck’s Bitcoin spot ETF shunt solidifies SEC’s outlook on crypto

Is crypto really for criminals?

The reality, however, may be quite different, as suggested by both the rising volume of enforcement activity in the crypto space (indicating the existence of substantial oversight), and also technical analysis of criminal activity in the space (conducted by independent firms and showing marked declines in the rate of criminal activity). Consider, for example, the 2022 Chainalysis report on crypto crime. This report documents a clear decrease in fraud and abuse as a percentage of all crypto activity.

Nonetheless, headlines continue to report that the dollar value of crypto fraud has risen significantly. It is perhaps understandable that news sources will frame stories in terms that are likely to gather the widest audience, and it is clear that $14 billion being stolen by scammers is a splashier headline than noting that crypto crime as a percentage of illicit transactions dropped to a remarkable low of 0.15% in 2021.

What is somewhat surprising, however, is the extent to which the “crypto is for criminals” narrative continues to be emphasized by some regulators, particularly in the SEC. SEC chair Gary Gensler has compared the crypto ecosystem to the “Wild West,” complaining that crypto “is rife with fraud, scams and abuse.” In mid-May 2022 Gensler was still sounding the alarm, suggesting that there is “a need to bring greater investor protection to these crypto markets.” This was on the heels of a decision by the SEC to nearly double the size of the Crypto Assets and Cyber Unit within its Department of Enforcement.

Thus, when a sister agency like the CFTC initiates an enforcement action against a major player in the crypto space with very detailed allegations of false and misleading statements suggesting that manipulation has indeed been occurring in the Bitcoin space, this adds fuel to the fire that the SEC continually focuses upon. Moreover, the likely position of the SEC that the markets are not sufficiently mature for approval of a spot-market Bitcoin ETF is only strengthened when founders of a crypto company facing that action publicize their disdain on social media.

Related: In defense of crypto: Why digital currencies deserve a better reputation

So, should there be a spot-market Bitcoin ETF?

In October of 2021 and early in 2022, the SEC approved multiple futures-based Bitcoin ETFs. Although these products were already available on CFTC-regulated exchanges, this was still a change in the SEC’s position that the entire crypto market was too susceptible to manipulation to allow exchange-traded products. The significance of the change in position is that the futures and spot markets are so closely linked now that there is no rational basis for concluding that only one of them is sufficiently free from the risk of fraud or manipulation to allow exchange-traded products.

On April 6, 2022, the SEC approved a futures-based ETF regulated under the same regulation under which spot-based ETFs would be regulated. It approved another such product in May 2022. While the agency explicitly declined to provide any “evaluation of whether Bitcoin […] has utility or value as an innovation or an investment,” it did conclude that both of these ETFs were sufficiently protected against manipulation to be traded on securities exchanges.

Now that the SEC has decided Bitcoin Futures ETFs may be traded on regulated securities exchanges, there would seem to be no reason to conclude that American investors should be denied the opportunity to participate in Bitcoin ETFs as well. Such investment is widely permitted in other nations, including Canada and Australia. As for the CFTC’s enforcement action on Gemini, it would be unfortunate if a cavalier response from the Winklevoss brothers — who have previously been turned down for permission to offer a Bitcoin ETF by the SEC — sets back the progress on this front any further.

The opinions expressed are the author’s alone and do not necessarily reflect the views of the University or its affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Carol Goforth is a Clayton N. Little professor of law at the University of Arkansas (Fayetteville) School of Law.

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When Will Bitcoin Bottom Out? Pi Cycle Bottom Says It Will Happen on July 9

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When Will Bitcoin Bottom Out? Pi Cycle Bottom Says It Will Happen on July 9

Many cryptocurrency enthusiasts have heard of the Pi Cycle Top indicator, which has “magically” predicted the peaks of several previous bull markets. However, few know that there is also its opposite, Pi Cycle Bottom, which also has some track record in trying to estimate the bottom of a bear market.

But before we take a closer look at Pi Cycle Bottom, let’s remind ourselves why its bullish nemesis has earned so much popularity.

The historic effectiveness of the Pi Cycle Top

We first wrote about the Pi Cycle Top on BeInCrypto over a year ago, when Bitcoin was close to reaching its previous all-time high (ATH). The indicator is based on the relationship between the double of the 350-day DMA and the 111-day DMA. The signal fired on April 12, 2021, and just two days later, Bitcoin reached a historic ATH of $64,900.

This high accuracy of the Pi Cycle Top was not an exception, as the indicator has been very effective in previous cycles as well. All 3 historical ATHs of previous bull markets coincided with the signal flashing up no more than 5 days before or after the peak.

Chart by Tradingview

The only ATH during which the Pi Cycle Top was far from crossed is the most recent one. On November 10, 2021, when BTC reached $69,000, the indicator failed to generate a signal. At the time, this was interpreted as a sign that the second wave of the bull market was not yet over. Today we know that the indicator failed in this case.

Pi Cycle Bottom and the end of a bear market

Pi Cycle Bottom is the opposite of Pi Cycle Top. The bearish version is the relationship between the 471 SMA and the 150 EMA. Moreover, the former is multiplied by a factor of 0.745. Not a very elegant construction, but historically quite effective.

As it turns out Pi Cycle Bottom indicator could be successfully used to estimate the area of the absolute bottom of two previous bear markets (blue lines).

The first time the 150 EMA fell below the 471 SMA was on January 16, 2015. This happened just two days after the absolute bottom of the BTC price at $152.

The second time the Pi Cycle Bottom generated the same signal was on December 16, 2018. This happened just one day after the absolute bottom of the previous bear market at $3122.

Chart by Tradingview

We are currently approaching the third signal in history and another bearish crossing of the two moving averages (blue circle).

When will Bitcoin bottom out?

If the relationship between the intersection of the two moving averages and the bottom of the BTC price repeats itself in this cycle, Bitcoin could soon reach the bottom of this bear market. Currently, the 150 EMA has begun the sharp decline characteristic of the recent capitulation phase. A crossover is likely in the coming days.

Cryptocurrency market analyst @TheRealPlanC tweeted his own prediction of the date of the intersection and reaching a hypothetical bottom for Bitcoin. Based on the movement trajectory of the two curves, he estimated that the intersection will occur on July 9, 2022.

Source: Twitter

If this were to happen, then in exactly 15 days the Pi Cycle Bottom would generate a signal that very accurately indicated the bottom of the BTC price in the previous two iterations.

One step further went another analyst @el_crypto_prof, who combined the potential signal from the Pi Cycle Bottom with a fractal analysis of previous cycles. In his opinion, if a potential Bitcoin bottom were to happen in the near future, it would fit well with analogies between previous cycles.

Source: Twitter

In the chart above, we can see that for the entire period from April 2021, the analyst includes the post-ATH correction phase highlighted in red. It also includes the latest ATH at $69,000 reached on November 10. Although technically a higher BTC price was reached then, many technical and on-chain indicators suggest that it was already a bear market.

Perhaps this was also the reason why the Pi Cycle Top did not generate a proper signal. If this is true and the correction in the BTC market has been going on for more than a year, then indeed we can soon expect an end to the long-term decline. The Pi Cycle Bottom indicator is just an additional layer of confluence that may make this scenario more likely.

For BeInCrypto’s latest Bitcoin (BTC) analysis, click here.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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It seems NFT-themed Bored & Hungry restaurant no longer accepts crypto

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It seems NFT-themed Bored & Hungry restaurant no longer accepts crypto

The alleged removal is a bit strange considering Bored and Hungry only opened its doors back in April.

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It seems NFT-themed Bored & Hungry restaurant no longer accepts crypto

The Los Angeles Times reported Friday that recently opened NFT-themed burger joint Bored & Hungry no longer accepts cryptocurrency as a form of payment for its food.

When questioned, one Bored & Hungry employee told the Los Angeles Times “Not today — I don’t know.” The individual didn’t give any indication of when the decision was made to cut crypto from the menu of payment options, nor did they know if crypto payments would be making a return.

Bored & Hungry initially launched back in April of this year. At the time, one worker told the Los Angeles Times that the majority of its customers didn’t seem to care about crypto payment options, also noting that customers were generally indifferent to “the restaurant’s fidelity to the crypto cause.”

Another Bored & Hungry restaurant patron told the Los Angeles Times “People want to hold onto their ethereum. They’re not gonna want to use it.” Customer Richard Rubalcaba said, “I don’t know how [crypto purchases] would work, with the crash.”

Many of the restaurant’s patrons stated that they are not hardcore crypto enthusiasts, and simply frequent the establishment for the food. Customer Jessica Perez said, “We rate this up there with In-N-Out, maybe even better.”

Changes to venue’s payment policies seem to fall in line with the overarching crypto and macro economical meltdown transpiring across the globe. But never fear, hungry crypto users! You can still visit Chipotle, which began accepting crypto payments earlier in June via Flexa. Several countries are facing relentless regulations and scrutiny and there are issues of contagion in the crypto market.

Cointelegraph reached out to Bored and Hungry owner Andy Nguyen for clarification on the restaurant’s crypto acceptance, but did not receive a response prior to publication.

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Celsius Network hires advisers ahead of potential bankruptcy: Report

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Celsius Network hires advisers ahead of potential bankruptcy: Report

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