"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 22 hours Experts Suggest A Gold Shortage May Be Looming
  • 2 days The World Is Drowning In $247 Trillion Debt
  • 2 days Tightening Immigration Policy Could Hurt The Tech Sector
  • 2 days The First Bitcoin ETF Might Be Just Months Away
  • 2 days U.S. Rent Costs Hit All-Time High
  • 2 days European Allies Plan To Continue Trade With Iran
  • 2 days Bitcoin Bounces Off Key Resistance Level
  • 3 days These 3 Industries Are Immune To The Trade War
  • 3 days Is This The Answer To The Looming U.S. Healthcare Crisis?
  • 3 days UK Regulators Hit Facebook With £500,000 Fine
  • 3 days Tesla’s U.S. Tax Credit Coming To An End
  • 3 days Ex-Goldman Banker Caught In A Billion Dollar Fraud Scandal
  • 3 days Investors React To Escalating Trade War Drama
  • 3 days The Three Horsemen Of The Bitcoin Apocalypse
  • 4 days 10 Countries Feeling The Heat As The Trade War Escalates
  • 4 days The Exorbitant Cost Of Getting Ahead In Life
  • 4 days $1,000 Investment Bible Leaked For $10
  • 4 days The U.S.-Chinese Race To End All Privacy
  • 4 days Gold And Silver Struggle As Sentiment Shifts
  • 4 days Would You Download A Gun?
The Three Horsemen Of The Bitcoin Apocalypse

The Three Horsemen Of The Bitcoin Apocalypse

On July 10th, two stories…

The Benefits Of Bitcoin Futures

The Benefits Of Bitcoin Futures

Introduced in December 2017 by…

Michael Kern

Michael Kern

Safehaven

Michael Kern is a newswriter and editor at Safehaven.com, Oilprice.com, and a writer at Crypto Insider. Michael has several years of experience covering cryptocurrencies, and…

Contact Author

Why Crypto Millionaires Are Trading Over Skype

World

Crypto whales who aren’t keen to get down and dirty with online exchanges are making hundreds of millions of dollars daily in digital currency trades using Skype as an ‘over-the-counter’ alternative.

Reuters has pinpointed some 20 traders and their wealthy investors, along with hedge funds, crypto miners and payment processors, who are using the messaging app as an OTC desk because the online exchanges that exist in this space just aren’t rising to the challenge.  

Dealers told Reuters that they’ve been handling, at times, more than $100 million in cryptocurrency trades a day, with single deals worth up to $250,000, and settlements conducted through bank wire transfers or digital wallets.

So why Skype?

Security.

No one wants to give online crypto exchanges their cash or coin to be hacked or otherwise hijacked, and dealers pointed to a direct correlation between the amount of skype business they’re doing on any given day and news of a crypto exchange hack.

What may turn out to be the biggest crypto theft to date is the hack of Coincheck, which lost $530 million in client crypto, surpassing the estimated $400-million hack in 2014 of Mt Gox, also of Japan.  

Coincheck is now under serious government scrutiny, and says it will partially refund its 260,000 investors--but no one knows when, or how.

Mt Gox went bankrupt and none of its users were compensated.

And those are just the two biggest. Related: The Vexing Relationship Between Gold, Bitcoin And The Dollar

In August 2016, Hong Kong-based Bitfinex was hacked to the tune of $70 million, but that’s worth $1.7 billion today so investor losses—in reality—are that much harder to stomach.

In March, the Slovenia-based NiceHash trading platform lost over $70 million in bitcoin to hackers, and a South Korean outfit, Youbit, was attacked twice in as many months before throwing in the towel and opting for bankruptcy.

Earlier this year, BitGrail lost $195 million in its clients’ crypto, and now it’s offering to reimburse them on the condition that they promise not to sue.

And the list goes on …

Big investors are too smart to risk their money on exchanges that don’t view security as the number one priority.

According to a study by Tyler Moore, approximately one-third of all cryptocurrency exchanges have been hacked since 2009, with over $15 billion stolen so far. According to Reuters, over $8 billion in bitcoin alone has been stolen from exchanges since 2011.  

Over-the-counter crypto trades are also about protecting big investors from price slippage when they’re trying to sell a large block of coins all at once, which could normally cause the price on the exchange to fall.

So is this OTC crypto trade legal? Well, presumably—for now. It’s up to the dealers to make sure (somehow) that they’re not laundering money through counterparties in the cryptosphere, directly or indirectly—but that’s a virtual (literally) impossibility.

But it’s not just about security. They choose Skype because it’s global and … importantly, free.

The irony, though is this: Cryptocurrency was supposed to be all about getting rid of the middle men, but big investors are bringing him back. At the end of the day, the exchanges haven’t proven themselves trustworthy enough to cut out the OTC broker.

By Michael Kern via Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment