By: Felix, Nancy PANews
Global stock markets plummeted, the crypto market collapsed, and the day known as "Black Monday" is destined to go down in history. There are many analyses of the reasons for the plunge, including concerns about economic recession, interest rate hikes by the Bank of Japan, and tensions in the Middle East. In addition to global macro factors, the massive "dumping" of Jump Trading may be directly related to cryptocurrencies.
Cashing out $440 million? Jump started to withdraw in July
Jump Trading seems to be cashing out in large amounts. According to the latest data monitoring by Lookonchain, since the sale of Ethereum began on July 24, Jump Trading has withdrawn $606 million of USDC from Binance and deposited $440 million of USDC to Coinbase. These USDC deposited in Coinbase may be exchanged for US dollars at a 1:1 ratio.
The large-scale liquidation of Jump Trading is also considered by the market to be the "culprit" of this round of ETH plunge. On-chain data shows that in recent times, Jump Trading's cryptocurrency division Jump Crypto seems to be liquidating some positions and has transferred hundreds of millions of dollars of tokens to exchanges, most of which are in the form of pledged ether. Since July 24, Jump Trading has redeemed $377 million worth of wstETH, most of which have flowed to CEXs such as Coinbase, Gate.io, and Binance, and the flow of funds is still continuing.
Coincidentally, when Jump Trading was “selling off” crypto assets, Arthur Hayes also said on X that he learned through traditional financial sources that a “big guy” had collapsed and sold all his crypto assets. Although Hayes did not reveal the specific name, the community pointed the finger at Jump Crypto.
According to the latest data from Arkham, as of writing, Jump Trading still holds crypto assets worth $410 million, of which stablecoins account for 93.9%.
The massive sell-off sparked speculation and market confidence was hit
Jump Trading is a high-frequency trading giant, and its crypto subsidiary is an important crypto participant, participating in the investment and incubation of many well-known projects. Its large-scale selling behavior naturally caused a lot of speculation and anxiety in the market.
Among them, the yen trading position is one of the reasons for much discussion in the market. According to Todd, co-founder of Nothing Research, Jump is a very top market maker in the field of foreign exchange trading, and it must be heavily involved in yen-related businesses. Therefore, the change of the yen makes people wonder whether there is a problem with its position and it needs to add more ammunition. He further explained that the sudden increase in interest rates of the yen and the rise against the US dollar have caused many "smart funds" who used to borrow low-interest yen to buy stocks to be forced to sell stocks to pay back the yen. Therefore, these stock markets are now in a state similar to being "forced to close" by a group of funds, which is naturally miserable. Now the main water pipe of cryptocurrency is the US stock ETF. When the US stock market fails, crypto assets are naturally very uncomfortable. Therefore, rather than saying that Jump trading is the "cause" of today's Crypto bloodbath, it is better to say that it is the "result."
"Considering that cryptocurrency itself is a very good liquid asset, and that Jump is facing investigations and prosecutions in the United States, and the leadership of the Crypto department has changed, Crypto has been used by Jump to 'abandon the car to save the driver.'" Todd pointed out in the tweet.
Regulatory challenges are also considered one of the reasons for Jump’s departure. It is understood that Forbes previously reported, citing people familiar with the matter, that the U.S. Commodity Futures Trading Commission (CFTC) is investigating Jump Crypto’s cryptocurrency business, including its trading and investment activities.
Some community members said that the CFTC's investigation into Jump Crypto is related to the collapse of LUNA, and it faces legal challenges for its involvement in the collapse of TerraUSD and the Terra ecosystem in May 2022. The US SEC is investigating Jump Crypto for allegedly manipulating UST prices, which resulted in the company and its CEO Kanav Kariya making a profit of approximately $1.3 billion. Therefore, if Jump Crypto does not make major concessions to the CFTC, they are unlikely to avoid legal consequences.
A few days after the investigation was announced, on June 24, Jump Crypto President Kanav Kariya announced his resignation, ending his six-year career at Jump Trading. Jump then began selling BTC, and in the past few days, it has been redeeming stETH almost every day and transferring it to CEX.
In the community's view, Jump Crypto's withdrawal may deal a heavy blow to the crypto industry, especially Solana. As Jump's key focus project and largest investment portfolio, Solana's rapid development is inseparable from the promotion of the organization to a certain extent. The fact that the daily turnover of USDC in the Solana ecosystem dropped from a peak of 100 billion to 5 billion on July 13 seems to confirm this statement.
At the same time, Jump Trading has multiple connections with the DeFi field, including being an active market participant and liquidity provider of Serum (a decentralized exchange hosted on the Solana chain), and a manager of the development of the cross-chain bridge Wormhole. These infrastructures and projects have also promoted Solana's explosive growth. It is worth noting that in November last year, due to the hacker attack on Wormhole, Jump also paid out of its own pocket to fill the gap of up to $320 million.
In a turbulent period for the crypto market, Jump's departure has hit market confidence, and coupled with widespread economic and political uncertainty, the crypto market has become more unpredictable in the short term. Even if interest rate cuts may drive a recovery in the crypto industry, it is likely to face a major reshuffle. The current crypto market crash also highlights the fragile state of the crypto market and the need for cautious optimism in the future.
Related reading: Witness history again! The crypto market suffered multiple negative impacts, and more than $1 billion was lost
