Accused of Crashing the Market, Uncovering the Crypto Market Maker Jump Crypto

Author: Xiyou, ChainCatcher

Editor: Marco, ChainCatcher

The day after the approval of the Ethereum ETF, the crypto market maker and investment firm Jump Crypto initiated a concentrated large-scale sell-off, which the community accused of being the main culprit behind the recent collapse of the crypto market.

According to on-chain data, in the past 10 days, Jump Crypto has sold ETH worth over $300 million.

As a well-known high-frequency trading company, Jump Trading's crypto subsidiary Jump Crypto has participated in the investment and incubation of several crypto projects such as Solana and Wormhole, and was once a barometer of the crypto industry, with every move closely watched by the market. This unusual large-scale sell-off has led community users to speculate whether they are planning to exit the crypto space.

Ethereum's Single-Day Maximum Drop Exceeds 25%, Jump Crypto's Sell-Off May Be the Culprit

On August 5, Ethereum's lowest price reached $2100, with a maximum single-day drop exceeding 25%, and the daily price volatility reached a new high since November 2022. The current price of Ethereum is $2358, completely erasing this year's gains and hitting a low not seen in nearly seven months.

In addition to the external macro negative news, the large-scale token transfer by market maker Jump Crypto is the main on-site trigger for today's panic drop in Ethereum's price.

Julian Hosp, CEO and co-founder of crypto investment firm Cake Group, stated on social media that the recent large-scale sell-off in the crypto market may be due to Jump Trading, either because the traditional market required liquidity due to margin calls or due to regulatory reasons exiting the cryptocurrency business.

Additionally, BitMEX co-founder Arthur Hayes also posted on social media that he learned through traditional financial channels that a "big player" had collapsed and sold all their crypto assets, with the community speculating that this "big player" refers to Jump Crypto.

According to crypto detective EmberCN, it seems that Jump began redeeming over $500 million worth of Lido's wstETH for ETH a few days after the launch of the US spot Ethereum ETF on July 25.

In the past 10 days, on-chain data from Spot On Chain shows that since July 25, wallets marked as Jump Crypto have deposited a total of $279 million worth of ETH to CEX exchanges.

Currently, Jump Crypto's actions of transferring to CEX are still ongoing, with another $46.78 million worth of ETH deposited to exchanges in the past 24 hours.

As of the time of publication, Jump Crypto has cumulatively transferred over $300 million worth of ETH to CEX exchanges, including ETH unstaked from Lido and ETH transferred from other wallets multiple times.

Currently, the Jump Crypto wallet still holds $101 million worth of wstETH and $8 million worth of RETH, which are in the process of being unstaked, with 97% of the positions mainly composed of stablecoins like USDC and USDT.

Jump Crypto May Exit the Crypto Space Due to CFTC Investigation

The frequent unusual activities of Jump Crypto in the crypto market have led the community to speculate whether the sell-off of hundreds of millions of dollars worth of ETH within a week indicates a preparation to exit the crypto space. In May last year, Bloomberg reported that due to regulatory reasons, Jump Crypto was scaling back its crypto business and might exit the US market.

Moreover, the official Twitter accounts related to Jump Crypto, @Jump Crypto, @Jump Crypto Engineering, and @Jump Trading, have stopped updating in September 2023, May 2023, and September 2021, respectively.

This further confirms users' suspicions that Jump Crypto's behavior of selling large amounts of assets may be preparing for an exit from the crypto space.

Combined with the previous investigation by the US CFTC, the already panicked crypto market is rumored to be shutting down its crypto-related business.

In June this year, it was revealed that the Commodity Futures Trading Commission (CFTC) was investigating Jump Crypto's cryptocurrency business (trading and investment activities) because investors in the SEC's civil lawsuit against Terra alleged that Jump Crypto may be related to the Terra collapse case.

According to court documents, investors accused Jump Crypto of participating in a fraudulent scheme involving Terra (UST), colluding to manipulate the UST price to mislead investors into believing that UST could maintain price stability, while in reality, it was being manipulated by institutions. Jump Crypto profited nearly $1.3 billion from this manipulation.

However, reports also pointed out that this CFTC investigation does not imply that Jump Crypto has engaged in any illegal activities. As of now, there have been no new developments publicly disclosed regarding the investigation into Jump Crypto.

Four days after the news of the CFTC investigation into Jump Crypto was announced, Kanav Kariya, who had served as president of Jump Crypto for over three years, announced his resignation.

Jump Crypto: From Glory to Decline?

As a department of the globally renowned high-frequency trading company Jump Trading that specializes in cryptocurrency and blockchain technology, Jump Crypto was born with a halo.

In 2021, Jump Trading completed fundraising for its seventh investment fund, raising a total of $350 million, setting a record for the company's fund-raising. It announced the establishment of the crypto investment department Jump Crypto and allocated 40% of the seventh investment fund to the cryptocurrency sector, with the 26-year-old Kanav Kariya serving as president of Jump Crypto.

According to Kariya's previous statements, Jump Crypto once had about 140 employees, more than 100 of whom were developers.

Backed by Jump Trading, Jump Crypto has always been an important market participant in the crypto field, participating as a market maker and investor in the investment and incubation of several well-known crypto projects, including Solana, Wormhole, Pyth, Serum, Avalanche, etc., and was once a leader in the direction of the crypto market.

However, after entering 2022, Jump Crypto seemed to be experiencing a series of crises, with projects like Wormhole being hacked and the collapses of Terra and FTX leading to severe financial losses.

In February 2022, the cross-chain bridge Wormhole, incubated by Jump Crypto, suffered a hacker attack, resulting in losses exceeding $300 million, all of which were borne by the team. Later, Wormhole separated from Jump Crypto and began independent operations.

In May of the same year, as a major investor in Terra, with the collapse of that ecosystem, Jump Crypto faced not only huge losses but also criminal lawsuit allegations regarding its collaboration with Terra to manipulate UST's price.

In November of the same year, with the collapse of FTX, Jump Crypto, as an investor in FTX, lost $206 million in the bankruptcy of FTX, making it the company with the largest loss after FTX or Alameda.

These crises led to severe losses for Jump Crypto, and subsequently, in May 2023, it was reported that Jump Crypto was scaling back its cryptocurrency business (such as splitting Wormhole) due to regulatory reasons and planning to exit the US market.

As more and more market makers entered the cryptocurrency market, competition became exceptionally fierce, with newcomers like Wintermute and DWF Labs rapidly rising and eating into market share, causing the once-glorious Jump Crypto to see its position decline in recent years.

According to Rootdata, as of August 5, Jump Crypto has participated in 91 crypto projects, with 31 of them being lead investments, but only 15 projects have been invested in since 2023.

In addition to the decrease in the number of investment projects, Jump Crypto's employee count has also been reduced. According to LinkedIn data, the department now has about 20 employees, a decrease of 19% in the past six months.

Although Jump Crypto's influence is not what it used to be, projects initiated or participated in by personnel who left Jump Trading and Jump Crypto continue to lead the development and trends of the crypto industry.

For example, the parallel EVM project Monad, which completed a $225 million financing at a valuation of $3 billion in April, has founding team members from Jump Trading, including founder Keone Hon, who was the head of research at Jump Trading for eight years, and co-founder James Hunsaker, a senior software engineer at Jump Trading and a core maintainer of PythNetwork.