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What did I do? How not to get a ban on the crypto currency exchange

September 12, U.S. residents will no longer be able to trade on the cryptocurrency exchange Binance. Traders will have to wait until the exchange will launch a new platform (Binance USA) specifically for the American market. Customers are frustrated — although Binance warned them in advance and they don’t risk losing the money. What can we say about the sudden blocking of an account, when you close all open orders? Digital Agency BDCenter told what to ban and how to avoid it.

Large shopping sites do not ban users for no reason. If your account is blocked, so the exchange believes that you have violated the terms of user agreement or the agreement itself has changed in such a way that you became a trespasser. Of course, few people read such agreements. And for good reason: usually the rules include a long list of grounds for blocking.

1. CryptoMemory and purity of cryptocurrency

Here is an excerpt from the rules focused exclusively on bitcoin platform BitMex (1.1):

“You agree not to do any actions related with the income from the illegal and prohibited activities (including CryptoMemory, darknet, money laundering or the financing of terrorism)”.

Why CryptoMemory got to the list of prohibited activities? It’s very simple: although the mixers while legal, they can be used to launder criminal funds, clearing of the stolen cryptocurrency, terrorism and so on. The probability that you get caught in the mix, is low. But remember — every bitcoin you make to the stock exchange after passage through the mixer, you give the site the reason for the ban.

This medal has a reverse side: if you happen to buy bitcoin, which was involved in illegal activities, you can theoretically be prosecuted. This is especially dangerous for businesses. Although the exchanges have the internal mechanisms to verify the “purity” of cryptocurrencies is that they don’t provide similar tools for users (who have to resort to third-party B2B services).

So far, only one exchange — Velvet Exchange said it is preparing to launch a tool for purity control of assets. Initially, the service will be available to corporate customers who purchase the Premium package, but the market is already working on a version for private clients. We can only hope that this important initiative will come to other platforms.

2. Market manipulation and big deals

Of rules Bittrex, which has one of the most impressive lists of pairs and trading altcoins (item 8.1):

“Shall not engage in any market manipulation”.

The trading volume of the stock market is still so small that even one large order can greatly affect the price. That is what happened in April of 2019, when the deal to $ 100 million, posted by “Keith”, has caused the growth rate of bitcoin to $1000.

Many traders deliberately manipulate prices: they place large orders at a price different from the market to trigger a reaction from the bots. Then they cancel the fake orders and put others at a new price (so called spoofing). It is obvious that altcoins markets, where daily turnover can not exceed hundreds of thousands of dollars, the problem is even more acute.

There are two popular ways to make large transactions without affecting the market price (which may be interpreted as manipulation) is an OTC trading and dark pools (dark pools). OTS-sites are OTC in nature: a client makes a direct request to the broker. By estimates of experts, up to 65% of all trade cryptocurrency passes through OTS.

Dark pools are exchanges where not advertised the bid and ask prices. Quotes are taken from major cripture, and transactions are made with no slip. On such sites accounts for up to 8% of the total kriptologii.

And dark pools, OTC and provide excellent liquidity, and maximum privacy, which is important for large investors. Unfortunately, both options involve significant risk of fraud. The same anonymity that is so attractive to whales, makes cheating much easier. For example, last year the crook almost managed to assign $ 700 million from the sale of bitcoins, which he was not.

Therefore, if you need to conduct a large transaction, it is reasonable to turn to a trusted a crypto currency exchange which offers automated OTS-services and transactions with Fiat for example, Kraken, Exchange Velvet or Bittrex. In this case, clarify that the exchange operates in full compliance with the law and provides upon request the closing documents, otherwise you may have problems with the Bank.

3. Automated trading

Of rules Poloniex (p. 22):

“It is forbidden to carry out any fictitious transactions, “wash” trading, ahead applications. […] You agree not to take any action that imposes an unreasonable or undue burden on the infrastructure of the exchange”.

After reading the first excerpt from the rules, the reader may ask: why did the exchange not to ban the bots? After all, they are responsible for the lion’s share of manipulations in the market and with the help of fictitious transactions, front-running and other dirty tricks.

The crypto currency exchange does not ban bots because each automatic transaction (even fictitious) brings the fee income. However, if you trades the bot, your account may be suspended based on the second rule — excessive load on the system. This results in the error “Too many requests” (“Too many requests”) coming from the API. When overloaded, the exchange will not disable the API (this would lead to the loss of income from Commission) — it just starts to block specific IP addresses.

This creates additional risk, as many investors are insured from identification in their jurisdiction and operating on cryptomeria using VPN.

4. Forbidden territory

Of rules Okex (p. 1):

“We can limit or block access to the Service is Prohibited from Territories including Hong Kong, Cuba, Iran, North Korea, Crimea, Sudan, Malaysia, Syria, USA, Bangladesh, Bolivia, Ecuador and Kyrgyzstan”.

Markets are not just prohibit citizens and residents of some countries to access their services. And you may be banned just for the use of the exchange for these countries — even if you went as a tourist. So if you plan to trade in the trip, check the list in advance. And, of course, impossible to predict at what point the regulator which is oriented exchange, decides to expand its sanctions list due to your country.

Of course, the reasons for bans are not limited to this, but the vast majority fall under those cases which we have described. How to protect from the ban? Guaranteed no recipe, but the best way is to carefully read the user agreement. After all, forewarned is forearmed, right?

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