The Founders of One of Crypto’s Largest Derivative Platform Gets Criminally Charged

Hello again and welcome to this week’s edition of Overbit Insights, where we try and discern what some of the biggest stories of the week meant for the financial markets, especially cryptocurrency, as a whole.

Our first story this week is by far the biggest of the week, if not the biggest of the year, for cryptocurrency. On the first morning of October, US authorities unleashed a bombshell for the cryptocurrency market. The US District Court for the Southern District of New York (SDNY), which is the most powerful court district in the US, issued indictments for the four senior members of BitMex - arguably the most popular derivatives exchange in the entire cryptocurrency space, for violating KYC protocols among other things. It’s important to note these indictments seem to be no minor infraction in the eyes of the US judicial system, despite what may be on the actual indictments.

“BitMEX made itself available as a vehicle for money laundering and sanctions violations,” the indictment released on Thursday said.

According to CoinDesk, the rumour mill indicates that statements like these point to more, grander indictments to come in the future that go well beyond simple violations of the Bank Secrecy Act and KYC protocols. These are just rumours for now, but some are saying that Bitmex served as the off-ramp for US-sanctioned countries like North Korea and Iran. If true, this would spell absolute disaster for Bitmex and anyone associated. As one would imagine, the market immediately responded with a large downward candle, bringing BTCUSD from high $10,000’s to the low $10,000’s. Though many are fearing (and calling) for a total collapse of cryptocurrency markets after this development, Bitcoin seems to have grown a bit more resilient to such bad news, as the coin has already regained most of its 1st October losses and is holding steady, which brings us into our second story of the week.

Despite the pending indictments and potential collapse of one of crypto’s largest derivatives exchanges, institutional investors appear unphased.

Zubr, a top research group in the cryptocurrency space, recently released a new analysis entitled “Institutional Investors Turn ‘Hodlers’ on Bitcoin Futures Markets”. In this new report, they go into detail analyzing the past year of institutional trading activity and its underlying trends. According to Zubr, Bitcoin futures trading reached over $4 trillion in the past year and was largely driven by growth on regulated institutional exchanges like CME and Bakkt. Furthermore, open interest on these exchanges continues to grow and remain high, especially when compared to trading volume. This points to higher, long-term exposure from investors who aren’t necessarily getting involved in every single micro price movement for Bitcoin. There’s a lot of data to parse through in the report you can read for yourself, but the key takeaway is this: in the past year, investment activity has been spurred on and even dominated by the growing surge of institutional interest. Nobody can predict the ups and downs of Bitcoin on a micro-scale, as much as we may try, but one thing’s for sure. These massive institutions who handle millions and sometimes billions of dollars continue to make bets on Bitcoin and cryptocurrency as a whole. Despite any price fluctuations or news cycles, we believe these people are making the right bet on a macro timeframe.

Closing out this week of Overbit.com Weekly Insights, we can quickly start to see the narrative in crypto, bitcoin, and digital assets, begin to emerge. This narrative is that while institutional interest is reaching all-time highs, things are looming in terms of regulations that many people are not speaking about, the proverbially large elephant in the room. Rest assured that at Overbit, not only will we continue to cover changing regulations, we adhere to all financial compliance, so you can easily put your trust into our platform when you choose it as THE place to trade.

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