Article source: Economic Daily
Since March, bitcoin and other virtual currencies have plummeted. Bitcoin plunged from the nearly $ 8,000 on March 12 to the $ 4,000 line, and it was only after March 20 that the price struggled to return to above $ 6,000. However, behind the virtual currency, the plunge is just one of many hidden risks. The "mixed water" of trading volume and the "paralysis" of the man-made manufacturing system have led investors to burst their positions … How deep is the "water" behind virtual currency trading?
After experiencing a plunge since March, prices of virtual currencies such as Bitcoin have only recently rebounded. However, the plunge is just one of the many risks behind it.
Virtual currency transaction is illegal
Facing the rapid increase in the price of virtual currency in the early stage, some people who did not know the truth held the dream of "getting rich overnight" and traded on the relevant virtual currency trading platform. Investors hope to obtain income from the fluctuation of virtual currency prices, but some platforms worry about their principal.
The common routine of virtual currency trading platforms is to deceive customers into the market through false transactions, and then force customers to liquidate their positions by manipulating market prices and malicious downtime. Some platforms even become criminal money laundering tools.
Since 2017, relevant departments have repeatedly reiterated that virtual currency transactions are illegal, and have stepped up efforts to crack down. On September 4, 2017, the People's Bank of China, in conjunction with the Central Network Office and other seven ministries and commissions, jointly issued the "Announcement on Preventing the Risk of Token Issuance and Financing", which clarified that virtual currency trading venues and ICO (first token issuance) are illegal financial activities. And carry out clean-up and rectification work.
Statistics show that the 173 domestic virtual currency trading platforms searched and released around the year basically achieved a risk-free exit; bitcoin traded in RMB accounted for more than 90% of the global total, down to less than 5%. It can be said that the clean-up and rectification of the virtual currency has effectively blocked the negative impact of its price surge and fall on our country, and has avoided a virtual currency bubble.
However, some virtual currency transactions are still "resurgent." To avoid supervision, some platforms continue to engage in related illegal activities by setting up servers outside the country and providing transaction services to people in the country in a so-called "going overseas" manner. Even more relevant platforms use the emerging technology of blockchain, under the guise of high income, to carry out online fraud in the name of blockchain technology innovation.
The data shows that the People's Bank of China, together with the Central Cyber Office and other departments, continue to monitor and crack down on this, and have monitored and disposed of more than 300 “outbound” virtual currency trading platforms.
However, industry experts reminded that everyone should keep their eyes open, actively enhance risk prevention awareness and self-protection awareness, and not blindly follow the hype to prevent economic losses caused by deception. If any organization is found to be involved in such illegal financial activities, it should report it to the relevant department in a timely manner. If it involves illegal or criminal activities, it should report to the public security organ in a timely manner.
Trading volume "mixed with water" to deceive investors
In the eyes of ordinary people, the larger the transaction volume of the virtual currency trading platform, the higher the popularity and reliability of the platform. As everyone knows, the transaction volume can also be faked.
According to market surveys, the average turnover rates of the top three virtual currency trading platforms were 13.25%, 8.33%, and 6.15%, respectively, which were significantly higher than the average turnover rate of foreign licensed exchanges of 2.37%. This shows that there is a suspicion of using robots to brush the trading platform.
In a market survey, random sample data analysis of several large virtual currency trading platforms found that their transaction characteristics violated Benford's law.
Benford's law refers to the same kind of data that is naturally generated without artificial modification, and its digital occurrence probability basically follows the same probability density distribution.
The market survey data shows that the frequency of a certain number in the sample transaction amount is abnormally tailed, which shows that these data have been artificially modified and are not the result of natural transactions. This further proves that there are false transactions and data fraud in the trading platform.
The virtual currency trading platform brushes out huge transaction volume through false transactions, and can obtain a higher ranking on the coin price website Coin Market Cap, so that the virtual currency gets more attention, creating a prosperous market illusion, so that customers generally overestimate The value of virtual currency, thereby attracting customers to enter the market.
The system "paralyzed" is actually manipulated
"20 times, 50 times, up to 100 times leverage can be selected! Buy and sell at any time, 7 × 24 hours trading without restrictions." Following the virtual currency, the virtual currency futures market is more popular, with up to a hundred times leverage "play" It has attracted many investors.
Since the price of bitcoin and other virtual currencies fell sharply in 2018, major virtual currency exchanges have successively launched virtual currency futures contracts, perpetual contracts, etc., and provide tens or even hundreds of times high leverage to attract unilateral downside Investors in the spot market cannot arbitrage.
Generally speaking, futures have the function of hedging risks. Investors buy a certain product in the spot market. When they find a downside risk, they can use the reverse operation of futures to avoid the risk of price changes, which is a good investment. tool. However, in the futures market of virtual currencies, it has increasingly evolved into a tool for collecting money in some virtual currency exchanges, and the traces of human manipulation have also become heavier.
In a market survey, it was found that some virtual currency trading platforms colluded with each other to plot the customer's property, and the artificial manufacturing system was "paralyzed", causing customers to passively burst their positions.
For example, a platform used the method of "unplugging the network" to make the trading platform repeatedly show abnormal phenomena such as flashbacks, stalls, and undisplayable positions, affecting customers' normal order placing, order cancellation, and position trading operations. The downtime usually lasts from half an hour to 2 hours. At the same time, another platform manipulated prices through robot trading, forcing prices to be lowered or raised during the downtime of other platforms. In the case of a high leverage of 10 times or even 20 times, customers faced with huge price fluctuations. Because of system downtime, they could not choose to stop losses or make up positions. The two platforms exchanged roles after a period of time, so the trick was repeated, and the former changed to price control, and the latter went down to occupy customer property.
The investigation found that a large-scale virtual currency trading platform had a total of 6 system downtimes within a year, 3 of which were sudden failures and downtimes. The platform admitted that there had been two liquidation bursts. At present, there have been many incidents in which the interests of contract investors have been damaged due to the inability of the virtual currency platform to log in.
Become a "hotbed" of criminal money laundering
With the popularity of virtual currencies such as Bitcoin, the risk of money laundering that promotes illegal economic activities is increasing. Because virtual currency is anonymous and can be circulated across borders, payment is convenient, which provides conditions for illegal and criminal activities such as money laundering. Many virtual currencies are transferred overseas through e-wallets and then cashed out overseas, with strong concealment, making supervision difficult to track.
Through the analysis of the withdrawal data of the virtual currency trading platform, it is not difficult to find that there are multiple small-value cumulative transfers and one large-value transfer clearing in Bitcoin transactions, which is consistent with the basic characteristics of money laundering.
One of the well-known cases is the previously banned online black market "Silk Road". This online black market sells all kinds of contraband, such as drugs and weapons, and its payment tool is Bitcoin.
Virtual currencies such as Bitcoin have also made ransomware more rampant. In May 2017, the ransomware called "Want to Cry" spread rapidly around the world. The files in the attacked computer will be locked, and users can only unlock hackers by paying the equivalent of 300 dollars in hackers. Tens of thousands of computers in more than 100 countries and regions have been attacked.
In July 2017, the founder of BTC-e, one of the world's largest digital asset trading platforms, was arrested. Since the establishment of BTC-e, it has created opportunities for the criminal customer base.
The platform does not require user identity verification, which allows criminals to use this platform for anonymous transactions and to mask the source of funds. The platform also lacks any anti-money laundering related processes, which facilitates the trading activities of cybercriminals around the world. Some of the bitcoin on the platform comes from the income of hacking user's computer system, fraudulent user's income, stealing user's identity and selling it, public officials' corrupt income, and selling drugs, etc. Criminal activities such as drug trafficking are more rampant.