Exit pump-and-dump by Binance

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https://preview.redd.it/ngedrw6xuzo71.jpg?1089&format=pjpg&auto=webp&s=b655f69a8f1e5755668efb1391b5f86a3f6503bd

The picture you see is of cover protocol’s COVER token gaining 300% in a matter of minutes following days of 0 activity just days prior.

This project is dead. The devs abandoned it and mentioned this in a tweet about a week ago asking all exchanges with the listing, including Binance, to stop all trading.

HOW THIS WORKS

1. In response to the series of bleak news surrounding cover protocol, after it got hacked, people started taking short positions. And finally, after the announcement of the project’s closure, short selling the token was literally like getting free money. Now this information of short positions held by people is known by Binance. To short a token you need a collateral to borrow that token against, in order to sell it in the market. If the collateral provided to borrow a token is not enough to offset the increase in price of said token, your collateral will be taken “liquidating” you to repay the loan. With a dead token like this, there shouldn’t be a possibility of it rising in price like that, right? Well, that’s only if you don’t consider that by stopping margin selling and subsequent forced liquidations, anyone with a lot of money and information can literally steal your money. They deploy a large capital to buy the token-> token price increases-> liquidation engine uses collateral to buy back the token-> price rises higher ->more shorts get liquidated and so on. Once the dominos of liquidations is triggered, the price pumps itself. This is known as a 'short squeeze'. The buyer can then dump their coins at a profit.

2. The price pump is purposefully vertical in order to prevent people from providing more collateral in time to prevent their positions from being liquidated, which is the only option they have left, since opening a new short is not an option anymore after Binance had already disabled short selling immediately after the devs' tweet.

HOW I KNOW THIS IS MANIPULATION

1. this pump happened in response to no news or development whatsoever

2. The project is literally abandoned!

3. Pump came conveniently right before market update notification (issued in apps) making COVER the top gainer 2 days in a row to attract more money.

4. The margin selling (shorting) of this token was stopped mere minutes after the announcement of the project’s closure and is still unavailable, but you’re still able to buy the token (Robinhood & GameStop but in reverse)

WHY I THINK BINANCE IS INVOLVED

1. This incident is different from your average pump and dump which can be carried out by anyone, since, in this case, the only person with the power of stopping margin selling, is the exchange/broker Binance themselves. Until there is exculpatory evidence to the contrary, it is only natural to assume foul play by Binance for both their actions (stopping margin selling) and inactions (not disabling buying/trading, or informing the users).

2. The margin selling of the token was stopped immediately after Cover tweeted requesting all exchanges to stop trading activity and to direct all investors to their article. This indicates that Binance knew about it but did nothing to safeguard their users’ interests, but rather, took positive action to their detriment. The Cover/BUSD pair traded for over a week after its demise with not a single action being taken by Binance to prevent negative consequences.

3. The most laughable stuff was the notification from Binance 2 days in a row with the message “Cover skyrocketed 150%” after it was already dead for over a week. Funny when you already know the reality, infuriating if you think about the negligence on their part. Sure, stupid people fomo-ing in will lose money, but Binance owes responsibility to the users. I guess that doesn’t matter when millions are up for grabs.

THE AFTERMATH

1. Cover had pledged the treasury to the investors, but I assume most of them lost money. FOMO-ing speculators, again, lost money. Short sellers got rekt.

2. On 17th of September, Binance announced the delisting of the token. Saying they review their products periodically for quality in order to safeguard their users (lol).

3. Bloomberg also launched a probe on September 17th into possible insider trading and price manipulation by Binance.

4. I also held a short position which I took minutes after the news of the project shutting down. Since I expected exit pumps like this one, I dodged getting rekt within seconds of being liquidated. I will now be forced liquidated by binance and will end up with almost no profit or loss.

5. This incident probably won’t get much attention because barely anyone knew about this protocol and what came afterward. But it’s kind of amusing how blatant this manipulation is.

I’m not saying that Binance, specifically, is evil. I would assume all crypto exchanges are, to varying degrees. It’s one thing to be cognizant of this fact indifferently, and quite another to experience it first-hand. Despite this, I will continue using Binance but thought to make this post with the objective of illustrating how corrupt unregulated markets are. This only gets worse when you combine the powers of a broker and an exchange into a single entity.

TL;DR - Binance knowingly let’s a dead token trade, stops margin selling, token pumps and dumps, and then gets delisted.