Monaco, ‘Pump and Dump’ denial, and being wary of sell walls

Cryptocurrency card company Monaco has strongly denied allegations of a ‘pump and dump’ scheme after its cryptocoin MCO debuted on South Korean crypto exchange Bithumb.

The price of MCO spiked 101% in the 60 minutes following the 19 April listing. The move pushed the price up to around $13 a coin, vastly increasing its value from the $5 level it was trading at in March and early April. As of 28 April, MCO is trading at around $11.71. While this kind of price movement is not unusual, market analysts have highlighted the timings of three large transactions of 500,000 MCO from a relatively dormant Monaco company account to Bithumb in the three hours preceding the listing announcement, at 5.57am on 19 April.

Monaco has previously said that the transactions were part of their strategy to increase liquidity and access to the MCO token.

But this answer just raises more questions.

Filip Minev, a serial entrepreneur, is now the CTO of Get Delta, a mobile cryptocurrency portfolio app. He pointed CryptoNewsReview to the “sell walls” accompanying the listing.

When trading, you’re watching for buy walls and sell walls. This is a method of looking at the market to see how many people are buying and selling, or putting in orders to buy and sell, the asset that you’re tracking. In this case, it’s a crypto token. “I personally don’t buy the ‘liquidity’ reason,” Minev said. “You could increase the liquidity independent of the date and time of a certain exchange listing your coin”.

“It’s hard to speculate if it was with malicious intent or not. However, seeing that there was enough buy volume to ‘eat’ those big sell walls, it actually could indeed mean that there was more demand than supply, hence offering more liquidity could make sense.”

As cryptotrading website SmartOptions.io explains: “If you see a big sell wall upcoming there’s a good chance it’s a bad time to buy that coin and a good time to get out.”

“The timings [of the large MCO transactions] are what makes it suspicious of course,” Minev added.

“That being said, the volume is always high on a new listing, so purely from the liquidity point of view, it does make sense.”

He advised investors: “Just be cautious when you spot these huge sell walls.”

The Regulation Issue

While there is something of an ICO gold rush at the moment, there is almost no regulation in cryptocurrency trading markets. So investors can expose themselves to large amounts of risk with very little comeback it they lose out.

Trading is, of course, a zero-sum game. For you to move quickly and make profits, another investor has be slower on the uptake and lose out. In a tweet the day after the Bithumb listing, the company revealed that the 24-hour trading volume total amount of trading topped $750m, giving MCO 3.29% of the overall cryptocurrency market trades for the day.

This represents a huge result for a relatively minor cryptocoin.

Filip Minev adds: “The best remedy is to set up your smart contract in that way so that tokens allocated to the company, the team and the advisors are released in small batches at different times. And that the first unlock only happens after a significant amount of time.”

According to this tweet from the @Monaco_card account, the ICO for MCO ran from May 18 to June 18 2017 and raised around $25m in Ethereum (ETH). A subreddit set up to monitor and discuss MCO points to a private Discord server where users, holders and interested parties can message one another, monitor prices and get answers to questions from Monaco’s management.

CryptoNewsReview approached Monaco via Discord and got the following response. CEO Kris Marzsalek said: “This is a serious issue that you raise.”

“To make the situation clear, Bithumb led the announcement of the MCO listing and issued their announcement in Korean on their site at April 19th at 1:57pm KST/ 12:57HKT. It can be found here.”

Hong Kong Time (HKT) is eight hours ahead of GMT, which would put the Korean announcement at 5.57am GMT.

Marzsalek continued: “Our tweet followed approx 5 mins later at 2:02pm KST / 1:02pm HKT.

“This period of time may account for the price and volume movement in MCO before the first English tweet.”

Marzsalek flatly denied that anyone from Monaco profited from the price movement, saying: “Monaco has measures in place to control access to confidential market sensitive information and our personnel with access to it are restricted from trading on non-public information.”

What is Monaco, anyway?

Whether it’s 5, 10 or 20 years down the line, cryptocurrency evangelists believe these new types of payment systems will overtake and wipe out the central banks that back fiat currency.

For now, Monaco is trying to work within the system and bring the two worlds together.

Their Visa-branded cards run with the tagline “Cryptocurrency in every wallet.” They allow people to deposit cryptocurrencies in their Monaco account and then (in theory) spend those funds in online shopping sprees or for groceries, just as they would with standard fiat currency cards.

As Marzsalek told business journalism show Squawk Box at CNBC, Monaco offers “the perfect replacement for your favourite credit card”.

The company attracted criticism last year when, according to Bloomberg, it shouted up its relationship with Visa before any deals were signed, sending the price of MCO spiralling up by nearly 700%.

There is no formal relationship between Visa and Monaco. Instead, the crypto cards are sent out by a German firm called Wirecard AG which has a licence from Visa to produce them.

This may seem like a pedantic point to make, but the result of tweeting about this Visa relationship sent the price skyrocketing regardless.

Monaco launched their first cards in Singapore in November 2017 and are eyeing product rollout in the US and Europe next, with a waiting list for new cards that sits at around 60,000 people.

Trading 101

In volatile cryptocurrency markets there’s no fiat backing, so investors are relying even more heavily on trust, sentiment and the momentum of prices to work out when to jump in and buy, or get out and sell.

Whales – the traders with the largest amounts of capital – can move markets in their favour by putting in very large buy or sell orders at a particular price position that can’t actually be filled and can be removed at any time. Thus, they set the floor or ceiling price for future movements.

SmartOptions.io notes: “Keep in mind that whales are using buy/sell orders to find pumpable coins to perform pump and dump actions.”

“The walls provide new traders some confidence that the particular position will hold and also lead them to think that the current price points are now the new floor. The result is buy orders will start showing up on the wall.”

“It might seem that they can only go up. In fact, whales can remove the wall anytime they want.”

“This is also true in the case of fake sell walls. Here’s why Whales can place big and un-fillable sell orders to hold down the price and buy the coin on the cheap. After they get enough coins they can then quickly pull their order off, which results in the price [spiking].

“That’s how the whale can win by tricking the traders into selling their coins cheap.”

What next for Monaco?

In a 27 April investor Q&A with Marzsalek, he writes “I don’t think anyone has ever done a listing on Bithumb and adding a KRW pair on Upbit on the same day. This is the way we plan to do things going forward: no hints, no announcements of announcements, just going out guns blazing with amazing news. Speaking of which, I was just looking at our roadmap and I have never been more confident in our team’s ability to deliver everything that we promised.”

Things move very quickly in crypto. None more so than in Monaco, who with the addition of three new execs, has now expanded to 62 staff.

Two weeks before the Bithumb listing, in a 13 April Q&A Marzsalek noted: “Exciting days are coming. When they do, don’t forget to pat yourself on the back for HODLing through all of it.”

It was indeed a small hint as to what was to come…