Wintermute, a well-known cryptocurrency trading entity, has recently faced allegations of playing a controversial role in the midst of the current market instability.
These allegations stem from user MartyParty‘s assertion that several prominent exchanges have been manipulating prices by selling off significant amounts of assets through Wintermute.
MartyParty’s Take on the Decrease in Asset Prices
The analyst accused leading cryptocurrency exchanges like Coinbase, Binance, and ByBit of participating in market manipulation. He alleged that,
“Exchanges are continuously driving prices down by using Wintermute to execute asset sales on their order books.”
He suggested that these exchanges are aiming to close leveraged long positions by selling off assets through Wintermute.
MartyParty elaborated on the rationale behind this strategy, claiming,
“Once they feel enough long positions have been liquidated, they will transfer Stable Coins to the market maker for asset purchases, boosting prices and liquidating new short positions.”
Essentially, after pushing prices down and clearing long positions, exchanges are said to provide stablecoins to market maker Wintermute to repurchase assets, prompting a price upsurge.
If true, this action acts as a double-edged sword, not only liquidating leveraged long positions during a price drop but also forcing the closure of any leveraged short positions established post the initial decline.
This results in a “short squeeze,” trapping traders who bet against the market after the initial drop, compelling them to buy back assets, further propelling prices upwards.
Further Insights
In this scenario, market makers and exchanges benefit from increased trading activity, earn fees, accumulate assets at reduced rates during sell-offs, and profit as prices surge.
In such a situation, retail traders, particularly leveraged ones, bear the brunt, as liquidations intensify market fluctuations.
However, MartyParty offered some solace to investors by recommending,
“Hold onto your spot assets, purchase at low points, and transfer assets from exchanges to self-custody.”
Present Market Conditions
Based on the most recent CoinMarketCap data, the global cryptocurrency market cap has fallen to $3.34 trillion, indicating a notable 6.94% drop within 24 hours.
Significantly, Bitcoin [BTC] and Ethereum [ETH] have exhibited relatively better performance but still experienced declines of 5.82% and 7.82%, respectively, during the same period.