Are CEXes ‘driving prices down’ using Wintermute? Allegations surface

• Wintermute faced scrutiny amid massive crypto sell-offs. 
• Exchanges’ controversial strategies exploited retail traders. 

Wintermute, a prominent crypto trading firm, has recently come under scrutiny for its controversial role amidst the ongoing market turbulence.

This is because X user MartyParty has claimed that many prominent exchanges were reportedly manipulating prices by offloading significant amounts of assets through Wintermute.

MartyParty on dropping asset prices

The analyst claimed that top cryptocurrency exchanges such as Coinbase, Binance, and ByBit are reportedly engaging in market manipulation. He started by saying, 

“Exchanges continue to drive price down using Wintermute to market sell assets on their order books.”

He claims that these exchanges are targeting to liquidate leveraged long positions using Wintermute to market sell assets.

MartyParty further explained the motivation behind this tactic, asserting,

“Remember when they are satisfied enough leverage Longs have been removed they will send Stable Coin to the market maker to market buy assets and drive prices back up, liquidating new Shorts.”

Basically, after driving prices down and liquidating long positions, exchanges will allegedly send stablecoins to market maker Wintermute so it may buy back the assets, pushing prices back up.

If true, this move is like a double-edged sword as it will not only liquidate leveraged long positions while the price is plunging but also liquidate any leveraged short positions that are placed after witnessing the falling price.

This creates a “short squeeze,” trapping traders who opened short positions after the initial price drop, forcing them to cover by buying back the asset, further accelerating the price rise.

What’s more?

In this process, market makers and exchanges profit by earning fees from heightened trading activity, accumulating assets cheaply during sell-offs, and benefiting as prices rise.

In such a case, retail traders, especially leveraged ones, are most affected, as liquidations amplify market volatility.

However, in a spot of relief for investors, MartyParty concluded by suggesting, 

“Do not get shaked out of your Spot asset holdings. Buy at the low and remove the assets from the exchanges to self custody.”

Current market trend

According to the latest data from CoinMarketCap, the global crypto market cap has plunged to $3.34 trillion, reflecting a sharp 6.94% decline in just 24 hours.

Notably, Bitcoin [BTC] and Ethereum [ETH] have fared slightly better but still recorded declines of 5.82% and 7.82%, respectively, over the same period.