On 15th July, Zeus Capital LLC, published a research report titled, ‘The Chainlink Fraud Exposed.’ The allegations against SmartContract, the developer of the protocol includes illegal security offering, centralized governance and control, fake marketing, bogus partnership announcement and what not.
Logic would demand a steep fall in prices after such a revelation. However, after running their theories and allegations for 24 days, Zeus Capital seems to have lost to the pumpers (or are they the pumpers themselves?).
Simple economics would tell you that demand and supply are the two driving factors for the price of an asset. However, one that is traded on derivatives exchanges competes with the long and short orders. The buyer of a short contract needs to find a seller and vice-versa. When the balance tips too much in favour of one side, the opportunity to cause a squeeze or liquidations becomes viable.
Price Action
LINK topped out just below $9 on the day the report was published. Following which it even begins a downtrend with higher highs and lower lows until a quick reversal above $6.5. This could be due to a combination of sellers booking profit and short-sellers putting pressure on the market.
Nevertheless, since the reversal despite continuous warnings and accusations by Zeus Capital, Chainlink [LINK] continued its upwards move to a high above $14.
Yesterday, before the just before the rise they tweeted that MakerDAO and Compound are backing from Chainlink’s pricing oracle. Along with that, a call to the SEC to look into the matter. The entire thing was presented strongly on Twitter.
Confirmed! First @MakerDAO, then @compoundfinance are stepping back from the unreliable and unsustainable Chainlink’s Oracle. $LINK is going down.
DYOR & read the investigative report – https://t.co/j5F8FMNkQU pic.twitter.com/28EAaHHQiV
— Zeus Capital (@ZeusCapitalLLP) August 8, 2020
Suspiciously enough, Zeus Capital’s short orders could be a ruse to mask the massive longs. A prominent crypto trader observed,
The short (if it was them) was part of the pump campaign. They understood the contrarian nature of crypto psychology and used it to pump. All losses were likely just tiny compared to the profit they made on their longs.
Moreover, the FUD was reason enough for whales to exploit the short-side liquidity. Whether or not Zeus Capital has been honest in their approach would not really matter now.
Liquidations
On Aave, the LINK price action (PA) caused massive liquidations of over $25 million. Reportedly on aavewatch, the borrowings in USDC were the ones that suffered the majority of the liquidations up to 96% million. Moreover, centralized exchanges like Binance, FTX, Huobi and so on have either own share of liquidations.
On Binance alone, the LINK/USDT insurance fund grew over $2 million, with more than $29 million flash drop in OI pointing at short liquidations.
The Perfect Plan
According to many experts, this is an elaborate pump campaign and not a new thing in crypto. Meltem Demirors, the CSO of Coinshares notes,
the @ZeusCapitalLLP “activist short” campaign on $LINK feels like an elaborate marketing plot to rally support and drive prices higher how much do you think they spent on (a) twitter ads (b) a website and (c) a few ppl to troll on twitter?
Last year, BSV proponents led by Craig Wright and Calvin Ayre did a similar thing by creating FUD around Bitcoin copyright. The price of BSV continues to make new highs despite the revelation behind the facade.
At it Again!
The DeFi portfolio of this particular address has been found to experience one of the largest liquidations of LINK shorts on Aave. Linksaka (alias) tracking the portfolio yesterday found that the liquidation price of over $6 million in LINK borrowings was at $11.8. Later, more collateral was rushed in as the price began surging upwards.
Currently, the account has over $6.3 million in LINK borrowings with a net worth of $2.3 million. The above account could possibly belong to Zeus Capital as well.
Furthermore, LINK continues to trade above $12.7 with considerable trading volume surging across exchanges like Huobi. The cryptocurrency is currently in a price discovery phase with a lot of FUC and FOMO around it.
What would be your investment strategy or opinion on Chainlink [LINK] at the moment? Please share your views with us.
