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Is Plustoken to Blame for Bitcoin’s Sell-Off?

Armchair theorists love postulating the reasons behind bitcoin’s latest price rise or sell-off. From China FUD to exchange hacks, anything and everything is fair game for blame. Plustoken is the latest bitcoin bear-maker that’s being credited with the last three months of downward price action. But is the revenue from a ponzi coin really responsible for bitcoin’s drop, or are there broader forces at play?

Also read: US Judge Denies Customer’s Plea to Quash IRS Bitstamp Inquiry

Anatomy of a Scam

In June, the ringleaders of Plustoken were arrested by Chinese police, putting an end to a ponzi scheme that is estimated to have netted almost $3 billion from gullible investors. The magnitude of major scams is often exaggerated for dramatic effect, but Plustoken’s numbers appear to check out: blockchain analysis has shown that at least 187,000 BTC – or about 1% of Bitcoin’s total circulating supply – was siphoned away by Plustoken.

Is Plustoken to Blame for Bitcoin’s Sell-Off?

The nature of Plustoken’s scam isn’t particularly interesting; get rich quick schemes are a constant menace within the cryptosphere, luring in unsophisticated investors who have little experience of cryptocurrency. Not everyone hoodwinked by the project was an easy mark, however: many supposedly shrewd investors were also snared by the promise of guaranteed returns of up to 30%. Although little known in the western cryptosphere, Plustoken was a big deal in the east, heavily promoted on Wechat and reaching a market cap of $17 billion and $340 a token.

The Plustoken story gets interesting upon its leaders’ arrest. Authorities might have detained the main culprits, but what they hadn’t seized was the bitcoins. After lying dormant for several months, the ill-gotten gains began to move through the blockchain and pretty soon were showing up on cryptocurrency exchanges.

Is Plustoken to Blame for Bitcoin’s Sell-Off?
Plustoken marketing materials

Two Pluses Make a Minus

Hackers and con artists regularly liquidate cryptocurrency on exchanges in a bid to flee to fiat or swap coins so the blockchain trail goes cold. They’re generally savvy enough to offload their hot crypto in small tranches to avoid causing slippage – for their sake, if not the market’s. With a haul of 187,000 BTC, however, the Plustoken scammers had no easy way of liquidating quickly without affecting spot prices. As a result, they stand accused of wreaking havoc twice over, following up their initial scam by triggering a sustained sell-off.

Ergo is a cryptocurrency researcher with a fascination for blockchain forensics. He’s also the leading source of knowledge on the whereabouts of the bitcoins Plustoken’s team trousered.

In October, Ergo published his analysis of the scammers’ attempts to launder their coins by moving them through Wasabi’s mixer. In total, 19,000 BTC were obfuscated in this manner, with a total of 54,000 BTC being moved through various mixers, often with poor privacy results due to the ease with which the large inputs and outputs could be linked.

On November 21, Ergo laid out his thesis that the movements of Plustoken’s bitcoins are indicative of sustained and heavy selling pressure which has coincided with the market downturn that took BTC below $6,500 for the first time since May.

Bigger Than Mt. Gox

Ergo’s research has confirmed the initial estimates of 187,000 BTC raised by Plustoken to be correct. The team also amassed $120 million in ETH, which is currently unmoved, and $69 million in EOS which is also dormant. To put Plustoken’s bitcoin haul into perspective, it is more than 40,000 BTC larger than the Mt. Gox coins that are due to be issued to creditors upon settlement of the bankruptcy case. The crypto community has been nervously awaiting the release of the Gox coins, anticipating that their unlocking will crash the market. Given these long-standing fears, it is reasonable to attribute a similar outcome from the Plustoken coins being sent to exchanges.

Cryptocurrency exchanges seem to be the final destination for the Plustoken bitcoins, with Huobi among the exchanges to receive deposits that can be traced back to the ponzi scheme. Ergo estimates that 1,300 BTC a day have been offloaded in this manner on exchanges, purely from Plustoken, adding: “To put that in perspective, that is over 60% of the daily block reward in sell pressure.”

Based on the number of remaining coins to be offloaded, it is estimated that there could be another 6-8 weeks of heavy selling. If so, it will be into the new year before the market sees relief. With another scamcoin, Cloud Token, still being shilled on Chinese social media and raising millions of dollars of bitcoin, and the $49 million of ETH hacked from Upbit this week on its way to cryptocurrency exchanges, there may be more pain to come.

Do you think Plustoken is resopnsible for the market downturn over the last three months? Let us know in the comments section below.

Images courtesy of Shutterstock.

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Kai Sedgwick

Kai’s been manipulating words for a living since 2009 and bought his first bitcoin at $12. It’s long gone. He’s previously written whitepapers for blockchain startups and is especially interested in P2P exchanges and DNMs.

Kai Sedgwick , 2019-11-29 04:50:42 ,

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NewsBlock © 2019 - 2020 All rights reserved.

NewsBlock © 2019 - 2020. All rights reserved.

While Bitcoin’s price seemingly moves without rhyme or reason — collapsing by dozens of percent and embarking on face-melting rallies on a whim — the cryptocurrency market is filled to the brim with fractals.

Related Reading: Analyst: Bitcoin Price Likely to Fall to Low-$8,000s as Chart Remains Weak

A brief aside: A fractal, in the context of technical analysis and financial markets anyway, is when an asset’s price action is seen during a different time. This form of analysis isn’t that popular, but it has proven to be somewhat valuable in analyzing Bitcoin.

One recent fractal popularized by a well-known cryptocurrency trader is implying that BTC is going to return to the low-$7,000s in the coming days.

Bitcoin Fractal Implies Retracement to Low-$7,000s

A well-known crypto trader going by “Tyler Durden” on Twitter recently posted the chart below, which shows that a Bitcoin price fractal may be playing out. The fractal has four phases: horizontal consolidation marked by one fakeout, a surge above the consolidation phase, a distribution, then a strong drop to fresh lows.

If the fractal plays out in full, BTC could reach the low-$7,000s again, potentially as low as $7,100. This would represent a 20-odd percent collapse from the current price point of $8,800.

It isn’t only a fractal that is hinting Bitcoin has the potential to visit its lows. As we reported on Saturday, Bloomberg believes that if the GTI Vera Convergence Divergence Indicator flips red, a downtrend could push the cryptocurrency back to $7,300.

Related Reading: Stephen Colbert Pokes Fun at Bitcoin in Monologue: Mainstream Gone Wrong?

Can Bulls Step In?

But again, many believe it is irrational to have such bearish interpretations of the cryptocurrency’s chart at the moment. As reported by NewsBTC earlier, Popular crypto trader Mayne recently noted that the “people waiting for $6,000” are irrational. He quipped that Bitcoin retracing and consolidating after its fourth-biggest bull move in history ($7,300 to $10,500, a 42% gain) is perfectly par for the course, but noted that it’s totally possible we can go lower from $8,800.

The medium-term technicals support this.

Trader and CoinTelegraph contributor FilbFilb found that by the end of November or start of December, the 50-week and 100-week moving averages will see a “golden cross,” which he claims is far more significant” for the Bitcoin market that other technical crosses.

Also, a Bitcoin price model created using Facebook Prophet machine learning found that the leading cryptocurrency is likely to end the year at just over $12,000. What’s notable about this model is that it called the price drop to $8,000 months in advance, and forecasted a ~$7,500 price bottom for BTC.

To put a cherry on the cryptocurrency cake, Crypto Thies observed that when Bitcoin bottomed at $7,300, it bounced decisively off the 0.618 Fibonacci Retracement of the move from $3,000 to $14,000, which correlates with the two-week volume-weighted moving average. He added that summer 2019’s consolidation was marked by Bitcoin flipping major resistances into support levels, implying that a bullish reversal and subsequent continuation is likely possible in the coming weeks.

Featured Image from Shutterstock

Nick Chong , 2019-11-10 12:00:38

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