3 reasons why the case is short

Conspiracy theories and scam rumors are rampant in the crypto industry, but sometimes the traders who provide most of their social media input lack basic market knowledge.

Recently, some prominent crypto market analysts identified the so-called “Binance manipulator”—a very active entity in Bitcoin (BTC) futures trading. This entity is said to be one of the main reasons why Bitcoin rejected at $66,000 and is retesting today's $63,500 support level.

Although there is undeniable evidence that there have been large offers and trades, a number of unproven hypotheses and incorrect assumptions contribute to the belief that this entity has effectively tried to suppress the value of Bitcoin.

Although one can imagine that the same entity has made many large offers on the Bitcoin futures order book, it is impossible to know whether other accounts were used to buy.

Arbitrage and hedging explain large Bitcoin futures orders

It is very common for large trading desks to have arbitrage and long-term investment vehicles, which is not illegal and not even unusual for traditional asset managers and hedge funds.

Therefore, one can use large transparent offers – fraud – to create fear, suspicion and doubt, while at the same time secretly buying those contracts. Basically, the investor looks like a big seller, when in fact this entity is a net buyer of contracts – a concept supported by Binance's increase in open interest.

Another source of conflicting data came from the buy side, as analysts saw the order book adding bids worth more than 4,000 BTC to Bitcoin futures after the $64,500 support level was breached.

So, this data indicates a situation where the seemingly big-caps are fighting to get a grip, but Bitcoin prices are falling as the S&P 500 futures signal a correction and the news flow pushes investors to already take profits. The side of the beat. Major economic publications have highlighted the slowdown in global growth and tensions in the Middle East.

The TWAP strategy contradicts the idea of ​​a “Binance manipulator”.

The nail in the coffin of the “Binance manipulator” theory comes from another post by ChimpZoo, which claims that the same entity abandoned offering large offers and sold market orders by executing Bitcoin futures at fixed intervals.

TWAP, or time weighted average price, is a preferred strategy among institutional traders, including arbitrage desks and market makers. By breaking up a large order into smaller pieces at regular intervals, the trader aims to reduce the price impact. This is the opposite of deception; So it doesn't make sense that the organization's main objective is to drive down the value of Bitcoin.

Arbitrage transactions, for example, in markets, attempt to capture differences between different exchanges or products. If the legal entity has a large over-the-counter (OTC) position in BTC or exchange-traded funds (ETFs) offered at a discount, it would make sense to place large discounts on Bitcoin futures contracts as a hedging strategy.

Related: 3 Signs Bitcoin Price Isn't Ready to Make New All-Time Highs

The arbitrage desk's job is to balance risk using derivatives markets, ultimately selling the spot market position and repurchasing the short (hidden) position on BTC futures. Similar examples can be found in options markets where a market maker can test the market by placing large sell orders in the future before closing a trade that results in price exposure.

Finally, we may not discover the true intent behind these entities, or whether the same group was behind the buying and selling or simply using futures to hedge other financial instruments. While the theory of the “Binance manipulator” cannot be completely rejected, all available data points to fair play and normal market activity.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.