From a public relations perspective, Wu Jihan's response did not have many flaws. But from the perspective of the media and even company operations, it is untenable.
Written by: Qin Jin
If someone asks me, what is the purpose of Matrixport, founded by Wu Jihan, in issuing a short report yesterday? The motive is hard to reveal, but it certainly created a sense of panic in the market.
Yesterday, Matrixport released the latest report titled "Why the SEC Will Reject BTC Spot ETFs Again". The report mentioned that the US Securities and Exchange Commission will reject all Bitcoin spot ETFs in January, and final approval may be in the second quarter of 2024. accomplish. The report also predicts that Bitcoin prices will fall to $36,000 to $38,000, and recommends that investors buy put options or even short Bitcoin directly.
After the release of this report, domestic and foreign industry media rushed to publish it. Some people even reported to the author that Matrixport’s own employees were spreading the content of the short report in their circle of friends.
Affected by this panic, the crypto market also responded. BTC plummeted from a high of $45,000 to near $40,000. A short-term plunge of $5,000. According to Coinglass data, 4 hours after the report was released, the liquidation amount of the entire network was US$531 million, the liquidation amount of long orders was US$496 million, and the liquidation amount of short orders was US$35.3799 million, of which the liquidation amount of BTC was 122 million US dollars. US dollars, the liquidation amount of ETH is US$91.6747 million, and the liquidation amount of SOL is US$26.2590 million.
The panic conveyed by the bearish report was not only reflected in the rapid plunge in BTC prices. It is also reflected in foreign social public opinion. Bloomberg analyst Eric Balchunas, who has been following the approval progress of Bitcoin spot ETFs from beginning to end, said on social media that many investors came to inquire after seeing the report published by Matrixport that "Bitcoin spot ETFs will be rejected", but he personally did not Seeing any indication other than imminent approval, so also wondering if Matrixport has any sources or if this conclusion is just speculation.
Balchunas added that Matrixport appears to have been a Bitcoin bull and has only recently published a report that the ETF will be approved. He is not sure why it published contrary information. On the morning of January 3, Eric Balchunas said that he believed that the probability of the Bitcoin spot ETF being approved before January 10 was 90%.
Bloomberg analyst Eric Balchunas also said that if the SEC intends to continue to delay or reject the Bitcoin spot ETF resolution, it will not hold meetings with Nasdaq, Chicago Board Options Trading Platform, and the New York Stock Exchange to determine the issuance of the Bitcoin spot ETF. Comments on 19b-4s submitted by the party. The SEC has been working closely with issuers offline to perfect their 19b-4s, rather than doing extensive re-filing like S-1s.
Another industry media, Bitcoin News, pointed the finger of the bearish report directly at Wu Jihan. He said that Wu Jihan, the founder of ASIC manufacturer Bitmain and a notorious supporter of large blocks during the Bitcoin "Block War" Han is also the co-founder of Matrixport -- the company that today released FUD that the SEC rejected?
We won't comment on Matrixport's motives. Just from the sentence in the report, "Short Bitcoin directly," it reminded me of Muddy Waters, a research institution that once focused on shorting concept stocks. Muddy Waters has been trading in short-term stocks for 11 years. He has become a god and turned over a car. Chinese companies that have short on US stocks include Luckin Coffee, New Oriental, TAL, GSX, Oriental Paper, etc.
What is the logic behind Muddy Waters’short? "Times Weekly" once wrote an article saying that Muddy Waters often "judges" a company at the beginning of the report. It has a clear point of view and will never stop talking if its words are not shocking, but its full ability is not limited to making shocking words. Muddy Waters' first report was extremely impactful. In addition to data, it also showed pictures with a full sense of reality, such as Oriental Paper's old production lines, smoky workshops, and raw materials like garbage dumps. And this tradition continues into the recent short reports.
For short, stock price fluctuations represent profit opportunities. For the "prey" who is short, even if there is no flaw in itself, the stock price drop caused by the short report is still an unbearable burden for the listed company.
What's the difference between Matrixport and Muddy Waters? The former relies on the release of reports with uncertain news to create panic and affect the direction of the encryption market. The latter relies on surveys, research, and field sampling to issue reports to influence the direction of the securities market.
Short the market is not a lawless place. On February 16, 2022, the Wall Street Journal quoted sources as saying that the U.S. Department of Justice launched an investigation into short institutions to determine whether they had lowered stock prices by sharing short reports in advance or engaging in illegal trading strategies.
According to the report, sources said that Carson Block, the founder of the well-known short agency Muddy Waters, received a search warrant from the FBI in October 2021. One of them added that Bullock's phone was also searched.
The crypto market is also not illegal. Previously, SBF, the founder of FTX, and CZ, the founder of Binance, pleaded guilty one after another for breaking the law. So is there legal liability for short the crypto market?
If cryptocurrencies are characterized as securities, short securities would be illegal. But not all cryptocurrencies are currently securities. This is also the U.S. SEC’s specialty in imposing heavy penalties on encryption companies. As long as there is market manipulation in the form of securities to harvest investors, the SEC will impose heavy penalties on the company in the name of protecting investors. In addition, the A-share market experienced severe turmoil in the summer of 2015, with the Shanghai Composite Index falling by nearly 2,000 points in less than a month. Some commentators believe that the "stock market crash" in 2015 began with short by some entities on the CSI 500 July futures contract (IC1507) in the stock index futures market. After the "stock market crash", the Financial Times wrote an article "It is urgent to combat malicious short." Malicious short triggered a huge discussion on the Internet.
Matrixport's response
A few hours later, Wu Jihan personally responded to the report. He said Matrixport analysts operate independently and express their opinions without any influence or interference from management. In addition, this latest report is prepared for Matrixport's VIP customers. However, its widespread dissemination in the media was not planned by Matrixport and is beyond our control.
In fact, Wu Jihan's response did not have many flaws from a public relations perspective. But from the perspective of the media and even company operations, it is full of loopholes. Three are untenable.
First of all, Matrixport is a professional crypto financial management and research company, and analysts operate independently to write reports. This view is untenable. Because you are not a media company, just like a reporter, you can choose any topic, follow any hot topics, and publish any articles you want. Even if a media company wants to select a topic and publish a manuscript, it must be authorized by the editor-in-chief or the editor-in-chief before it can be published.
As a professional and well-known industry company, analysts are allowed to produce reports at will. If this is done, will the industry be turned into a mess by analysts sooner or later? Analysts in domestic and foreign securities research companies are people who can influence the direction of the securities market. Will they issue reports at will without authorization from superiors? I don't think so.
Secondly, it is untenable that this report is for VIP customers. Currently, the crypto market is issuing a short selling report to its VIP customers based on the long-awaited approval of the Bitcoin spot ETF, the Bitcoin halving in April, and the Federal Reserve's interest rate cut signals. Isn't this hurting your customers? I don't understand. Anyone who understands can leave a message in the message area and discuss together.
Finally, the widespread publicity in the media that this was not what Matrixport planned is indefensible. If the original intention is not to disseminate it widely in the media, but just to publish a report for internal employees and VIP customers to read. Why did the media learn about the report immediately and publish its contents, and also spread it widely on WeChat Moments and Social Media X? Even my own employees reposted it on their WeChat Moments.
There is an old saying that to explain is to cover up, and to cover up is to make up stories. It makes sense to some extent. It is a kind of psychological mapping, which reflects the truth of the incident to some extent.
