Jump Trading's Wallets Under Scrutiny After Nasty Crypto Selloff

(MENAFN- Live Mint) (Bloomberg) -- As crypto investors nurse their wounds following a nasty selloff early in the week, many traders are scrutinizing the wallets of Jump Trading in search of answers.

The value of CryptoCurrencies held by digital wallets believed to belong to Jump dropped by around $247 million in total between August 4 and 8, according to data from wallet tracker Arkham. In recent weeks, Jump has sent hundreds of millions of dollars worth of Ether to the so-called hot wallets of exchanges such as Binance, OKX and Coinbase, according to the researcher. A move to a hot wallet often suggests an owner is planning to sell.

Ether, the second-largest cryptocurrency after Bitcoin, was one of the hardest-hit among major tokens in recent weeks. It sank as much as 23% on Monday, and is down about 35% since July 22.

While the price declines on Sunday and Monday were part of a massive selloff in everything from global stocks to obscure crypto tokens, Ether“has underperformed Bitcoin sharply during the recent selloff,” said Kaiko analyst Dessislava Aubert, who added that the price ratio of Ether to Bitcoin has dropped to the lowest level since 2021.“This can be linked to increased selling pressure from Jump and other market makers.”

A Jump Trading spokesperson said the company never comments on its wallets or trading activity. Bloomberg could not independently verify the ownership of the wallets that Arkham attributes to Jump.

Jump's presumed selling volume was just a small portion of Ether's average daily volume of about $9 billion this year, according to researcher CCData. However, given its high profile over the years as a major market maker and trader of digital assets, the movement of its crypto may have spooked some investors.

“Retail and specialists alike know Jump as a smart-money insider, who receives the spread” between bid and ask prices, said Rich Rosenblum, co-chief executive officer of market maker GSR.“It was understandably alarming to see them paying to exit positions on a Sunday. You'd expect them to be on the other side of that move.”

Still, some in the market are skeptical that Jump's activities exacerbated the moves in crypto. Zaheer Ebtikar, founder of crypto fund Split Capital, called much of the finger-pointing“just nonsense.”

“People think it's interesting because it's a known player,” he said, adding that Jump gets a lot of scrutiny because traders think the firm knows things that others don't.“Crypto people love gossip.”

Jump has a mixed history in crypto. At the end of June, Kanav Kariya, the head of Jump Trading's crypto unit, said he is leaving the company. His exit followed a difficult two years in which Jump was at the center of one of crypto's largest collapses. The firm was a major backer of the failed TerraUSD stablecoin project, and it was among trading firms questioned by US prosecutors in a probe of the token's 2022 collapse.

The Chicago-based trading house also had to provide about $320 million to cover losses at the crypto project Wormhole after it was hacked in 2022. Jump spun off Wormhole last year, with several of the project's staffers leaving the firm to run it as an independent entity.

The Commodity Futures Trading Commission is investigating Jump's crypto trading and investment activities, Fortune reported on June 20.

Jump pulled back from its digital-asset trading activities in the US last year due to regulatory uncertainty in the region. It remains an active player in the sector, however. Its crypto holdings are up slightly since the beginning of the year to about $434 million, according to Arkham.

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