Binance Loses 7000 BTC in Hack; WeChat Bans Crypto Trading; Milestone for Ethereum 2.0 as Testnet Launched

The crypto industry has grown accustomed to seeing Binance dominate headlines, and today was no different. What was, however, was the contents of the news itself. Indeed, for the first time in its near-two-year-long existence, the world’s largest cryptocurrency exchange was hacked for 7,000 BTC.

Believe it or not, other significant news stories broke today. Among them, reports that Chinese messaging giant WeChat has updated its payment policy to state that users engaging in crypto trading will be banned. More positively, Prysmatic Labs released the first staking-enabled testnet for Ethereum 2.0.

In the markets, bitcoin (BTC) retraced 1.81% for the day to $5,887.04. As for ether (ETH), it slumped 5.32% to $170.06. The MVIS CryptoCompare Digital Assets 10 Index also fell 0.65% to 2,854.90 as at time of writing.

Cryptocurrency market update

Binance Loses $40.7 Million Worth of Bitcoin

Top-tier cryptocurrency exchange Binance reported a hack totalling 7,000 bitcoin (≈$40.7 million) was discovered late-afternoon on May 7. In an official statement, Binance co-founder and chief executive Changpeng ‘CZ’ Zhao said “one transaction” was all that was used by the hackers, who were able to obtain large volumes of user information including API keys and two-factor authentication codes. In order to compromise user accounts, the hackers “used a variety of techniques, including phishing [and] viruses,” the statement pointed out. To fully cover the loss, Binance will use its Secure Asset Fund for Users, a BNB-denominated fund that holds 10 percent of all trading fees absorbed by the exchange. CZ discussed the idea of re-organizing the bitcoin blockchain to undo the hacked transactions, which caused some controversy amongst the community.

Cryptocurrency Transactions Banned by WeChat

Popular Chinese social media platform, WeChat, reportedly announced it will terminate any user accounts involved in cryptocurrency trading. Per sources familiar with the matter, WeChat’s management has revised its payments policy to read “merchants may not engage in illegal transaction such as [those involving] virtual currencies.” The updated policy will come into effect at the end of this month. Ever since China outlawed cryptocurrency exchanges in 2017, messaging apps like WeChat have emerged as popular solutions for prospective cryptocurrency buyers and sellers looking to perform over-the-counter trades.

Prysmatic Labs Releases Ethereum 2.0 Phase 0 Testnet

Ethereum scaling solution developer Prysmatic Labs launched its Ethereum 2.0 testnet. The release marks the first staking-enabled testnet for Ethereum 2.0; a major development milestone, to be sure. In a blog post accompanying today’s release, Prysmatic Labs’ co-founder and team lead Preston Van Loon shared the “next step is to launch v0.6 of the official Ethereum 2.0 specification into [its] testnet.” This, he added, promises to be “a massive improvement, as the research team aims to freeze the spec by June and have something that will represent a more polished version for mainnet release.”

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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