One of cryptos longest-running exchanges has been sold

One of the longest-standing crypto exchanges has new owners after Europe-based Bitstamp was sold to South Korea’s Nexon, marking the gaming firm’s second such acquisition.

The acquirer is NXMH, a Belgium-based PE and investment firm owned by NXC — the parent of Nexon — and it will take a majority 80 percent stake in the business for an unknown fee. The New York Times’ Nathaniel Popper suggested earlier this year that Bitstamp was in the process of being sold “to South Korean investors” for $400 million, but NXC declined to comment on the price when asked by TechCrunch.

NXC acquired 65 percent of Korea-based exchange Korbit one year ago for 91.3 billion KRW, or approximately $79.5 million at the time.

Bitstamp was founded in 2011 by Slovenian entrepreneur Nejc Kodrič with an initial €1,000 and it survived the heady early days of crypto, unlike a certain peer named Mt. Gox. Today, Bitstamp is ranked inside the world’s top 30 exchanges based on trading volume with more than 100 staff. Bitcoin and XRP are among its most traded tokens, according to data from Coinmarketcap.com.

The company has a license to do business across the EU but it also works with customers worldwide.

Bitstamp has been profitable since its early life, but Kodrič revealed the sale is down to the potential to work with NXC, which he sees as a like-minded partner.

Bitstamp has been regularly approached by suitors for quite some time. The reason why we finally decided to sell the company is a combination of the quality of the buyer, the quality of the offer and the fact that the industry is at a point where consolidation makes sense. A major factor in agreeing to the sale is that the mission, leadership and vision of the company remains the same.

We believe this acquisition is the logical next step in Bitstamp’s growth as a company and I look forward to the future with this team.

The Bitstamp CEO said business will continue as normal — he’ll retain his position as CEO and keep 10 percent of the company.

Interestingly, he told Fortune that regulatory compliance meant the deal took some ten months to close after first being agreed in December 2017 when crypto market valuations hit a peak — with Bitcoin, in particular, getting close to a record $20,000 valuation.

Bitstamp raised around $14 million in capital from investors along its journey, with U.S-based Pantera capital one of its major backers.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Researchers find that one person likely drove Bitcoin from $150 to $1,000

Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman have written a fascinating paper on Bitcoin price manipulation. Entitled “Price Manipulation in the Bitcoin Ecosystem” and appearing in the recent issue of the Journal of Monetary Economics the paper describes to what degree the Bitcoin ecosystem is controlled by bad actors.

To many it’s been obvious that the Bitcoin markets are, at the very least, being manipulated by one or two big players. “This paper identifies and analyzes the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired,” the researchers wrote. “During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity. Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.”

The team found that many instances of price manipulation happened simply because the market was very thin for various cryptocurrencies including early Bitcoin. “Despite the huge increase in market capitalization, similar to the bitcoin market in 2013 (the period examined), markets for these other cryptocurrencies are very thin. The number of cryptocurrencies has increased from approximately 80 during the period examined to 843 today! Many of these markets are thin and subject to price manipulation.”

The manipulation happened primarily via two bots, Markus and Willy, that seemed to be performing valid trades but did not actually own the bitcoin they were using. During the Mt. Gox hack a number of these bots were able to create fake trades and make off with millions while manipulating the price of BTC.

The publicly reported trading volume at Mt. Gox included the fraudulent transactions, thereby signaling to the market that heavy trading activity was taking place. Indeed, the paper later shows that even if the fraudulent activity is set aside, average trading volume on all major exchanges trading bitcoins and USD was much higher on days the bots were active. The associated increase in “non-bot” trading was, of course, profitable for Mt. Gox, since it collected transaction fees.

But the Willy Bot likely served another purpose as well. A theory, initially espoused in a Reddit post shortly after Mt. Gox’s collapse (Anonymous, 2014b), is that hackers stole a huge number (approximately 650,000) of bitcoins from Mt. Gox in June 2011 and that the exchange owner Mark Karpales took extraordinary steps to cover up the loss for several years.

The bottom line is simple: if Bitcoin wants to be taken seriously it probably shouldn’t be this easy or legal to manipulate the markets. While decentralization is supposed to replace regulation it’s clear that there is still a way to go before it can be truly taken seriously. “As mainstream finance invests in cryptocurrency assets and as countries take steps toward legalizing bitcoin as a payment system (as Japan did in April 2017), it is important to understand how susceptible cryptocurrency markets are to manipulation. Our study provides a first examination,” write the researchers.