Wu Jihan creates panic in BTC

Author: Qin Jin, Source: Carbon Chain Value

If someone asks me, what is the purpose of the short-selling report issued by Matrixport founded by Wu Jihan yesterday? The motive is hard to reveal, but it certainly created a sense of panic in the market.

Yesterday, Matrixport released the latest report titled "Why the SEC Will Reject BTC Spot ETFs Again". The report mentioned that the US Securities and Exchange Commission will reject all Bitcoin spot ETFs in January, and final approval may It will be implemented in the second quarter of 2024. The report also predicts that Bitcoin prices will fall to $36,000 to $38,000, and recommends that investors buy put options or even short Bitcoin directly.

After the release of this report, domestic and foreign industry media rushed to publish it. Some people even reported to the author that Matrixport’s own employees were spreading the content of the short-selling report in their circle of friends.

Affected by this panic, the encryption market also responded. BTC plummeted from a high of $45,000 to near $40,000. A short-term plunge of $5,000. According to Coinglass data, 4 hours after the report was released, the liquidation amount of the entire network was US$531 million, the liquidation amount of long orders was US$496 million, and the liquidation amount of short orders was US$35.3799 million, of which the liquidation amount of BTC was 122 million US dollars. US dollars, the liquidation amount of ETH was US$91.6747 million, and the liquidation amount of SOL was US$26.2590 million.

The panic conveyed by the bearish report was not only reflected in the rapid plunge in BTC prices. It is also reflected in foreign social public opinion. Bloomberg analyst Eric Balchunas, who has been following the approval progress of Bitcoin spot ETFs from beginning to end, said on social media that many investors came to inquire after seeing the report published by Matrixport that "Bitcoin spot ETFs will be rejected", but he personally did not Didn't see any indication other than imminent approval, so would also like to know if Matrixport has any sources or if this conclusion is just speculation.

Balchunas added that Matrixport seems to have always been a Bitcoin bull and has only recently published a report that the ETF will be approved. He is not sure why it released contrary information. On the morning of January 3, Eric Balchunas said that he believed that the probability of the Bitcoin spot ETF being approved before January 10 was 90%.

Bloomberg analyst Eric Balchunas also said that if the SEC intends to continue to delay or reject the Bitcoin spot ETF resolution, it will not hold meetings with Nasdaq, Chicago Board Options Trading Platform, and New York Stock Exchange. Identifying comments on 19B-4s filed by issuers of Bitcoin spot ETFs. The SEC has been working closely with issuers offline to perfect their 19b-4s, rather than doing extensive re-filings like S-1s.  

Bitcoin News, another industry media, pointed the finger of the bearish report directly at Wu Jihan. He said that the founder of ASIC manufacturer Bitmain and notorious figure during the Bitcoin "Block War" Prominent big block proponent Jihan Wu is also a co-founder of Matrixport – the company that today released FUD that the SEC rejected?

We do not comment on Matrixport’s motives. Just from the sentence in the report, "Short Bitcoin directly," it reminded me of Muddy Waters, a research institution that once focused on shorting concept stocks. Muddy Waters has been trading in short-term stocks for 11 years, and he has become a god and overturned. Chinese companies that have shorted on US stocks include Luckin Coffee, New Oriental, TAL, GSX, Oriental Paper, etc.

What is the logic of Muddy Waters’ short selling? "Times Weekly" once wrote an article saying that Muddy Waters often "judges" a company at the beginning of the report. It has a clear point of view and will never stop talking if its words are not shocking, but its full ability is not limited to making shocking words. Muddy Waters' first report was extremely impactful. In addition to data, it also showed pictures with a full sense of reality, such as Oriental Paper's old production lines, smoky workshops, and raw materials like garbage dumps. And this tradition continues into the recent short-selling reports.

For short sellers, stock price fluctuations are good profit opportunities. For the "prey" who is shorted, even if there is no flaw in itself, the stock price drop caused by the short-selling report is still an unbearable burden for the listed company.

What is the difference between Matrixport and Muddy Waters? The former relies on the release of reports with uncertain news to create panic and affect the direction of the encryption market. The latter relies on surveys, research, and field sampling to issue reports to influence the direction of the securities market.

The short-selling market is not a lawless place. On February 16, 2022, the Wall Street Journal quoted sources as saying that the U.S. Department of Justice launched an investigation into short-selling institutions to determine whether they had lowered stock prices by sharing short-selling reports in advance or engaging in illegal trading strategies.

The report stated that sources said that Carson Block, the founder of the well-known short-selling agency Muddy Waters, received a search warrant from the FBI in October 2021. One of them added that Bullock's phone was also searched.

The crypto market is not illegal either. Previously, FTX founder SBF and Binance founder CZ pleaded guilty to violating the law. So is there legal liability for shorting the crypto market?

If cryptocurrencies are characterized as securities, shorting securities would be illegal. But not all cryptocurrencies are currently securities. This is also the U.S. SEC’s specialty in imposing heavy penalties on encryption companies. As long as there is manipulation of the market in the form of securities and harvesting investors, the SEC will impose heavy penalties on the company in the name of protecting investors. In addition, the A-share market encountered violent turbulence in the summer of 2015, when the Shanghai Composite Index fell by nearly 2,000 points in less than a month. Some commentators believe that the 2015 “stock market crash” began with short selling by some entities on the CSI 500 July futures contract (IC1507) in the stock index futures market. After the "stock market crash", the Financial Times wrote an article "It is urgent to combat malicious short selling." Malicious short selling triggered a huge discussion on the Internet.

Matrixport’s response

A few hours later, Wu Jihan personally responded to the report. He said Matrixport analysts operate independently and express their own opinions without any influence or interference from management. Additionally, this latest report is prepared for Matrixport’s VIP customers. However, its widespread dissemination in the media was not planned by Matrixport and is beyond our control.

In fact, Wu Jihan’s response did not have many flaws from a public relations perspective. But from the perspective of the media and even company operations, it is full of loopholes. Three are untenable.

First of all, Matrixport is a professional crypto financial management and research company, and analysts operate independently to write reports. This view is untenable. Because you are not a media company, just like a reporter, you can choose any topic, follow any hot topics, and publish any articles you want. Even if a media company wants to select a topic and publish a manuscript, it must be authorized by the editor-in-chief or the editor-in-chief before it can be published.

As a professional and well-known industry company, analysts are allowed to issue reports at will. If this is done, will the industry be turned into a mess by analysts sooner or later? Analysts in domestic and foreign securities research companies are people who can influence the direction of the securities market. Will they issue reports at will without authorization from superiors? I don't think so.

Secondly, this report is for VIP customers and is untenable. Currently, the crypto market is issuing a short selling report to its VIP customers based on the long-awaited approval of the Bitcoin spot ETF, the Bitcoin halving in April, and the Federal Reserve’s interest rate cut signal. Isn’t this hurting your customers? I don't understand. Anyone who understands can leave a message in the message area and discuss together.

Finally, the widespread publicity in the media that this was not what Matrixport planned is untenable. If the original intention is not to disseminate it widely in the media, but just to publish a report for internal employees and VIP customers to read. Why did the media know the report immediately and publish its contents, and also spread it widely on WeChat Moments and social media X? Even my own employees reposted it on their WeChat Moments.

There is an old saying that explanation is to cover up, and cover-up is to make up stories. It makes sense to some extent. It is a kind of psychological mapping, which reflects the truth of the incident to some extent.