Crypto whale stuck in $150M short squeeze during battle for tiny altcoin

Two whales figuring out the puzzle that is tiny cryptocurrency MobileCoin, which is undergoing a short squeeze.

Crypto whales are locked in a war for a tiny altcoin, forcing its price to surge hundreds of percent after a GameStop-esque short squeeze.

Microcap crypto MobileCoin (MOB) — whose previous claim to fame was receiving brief advisement from Signal founder Moxie Marlinspike — is up nearly 400% in the past few days.

Recently, MobileCoin’s price appears heavily influenced by two major parties: a short-selling whale and a crypto fund intent on squeezing them for all they’re worth.

Protos has learned the crypto whale had built a short position in MOB via derivatives exchange FTX, equal to about 25% of the token’s estimated circulating supply (‘estimated’ as there’s no official figures).

The whale’s short is thought to be worth between $100 million and $150 million.

Short sellers bet the price of an asset will go down.
They borrow the asset, sell it, and wait for it to fall.
They re-buy, return the assets, and pocket the difference.

But while the whale had been shorting MOB for weeks, the process wasn’t totally smooth. At one point on March 26, someone sold a large amount of MOB at once and accidentally triggered a flash-crash on FTX.

Woops. Someone with deep pockets accidentally sold too much MOB — and nobody was buying.

MOB’s liquidity on FTX was so low that whoever dumped their tokens cleared the sell order books entirely. Simply put, there weren’t enough buyers at the time of the dump so the price of MOB spiralled 20% in under 15 minutes.

Whether the whale and the dumper are the same entity is unclear, but we understand the flash-crash contributed to a significant spike in the FTX’s lending rate for MOB. FTX briefly offered MOB holders 3,000% APY to loan their tokens.

This might sound like a great position for our short-selling crypto whale. However, MOB’s price quickly rebounded and began to rise.

If the crypto whale was short MOB, who was long?

Around this time, crypto fund CMS Holdings postured to short squeeze the crypto whale. CMS Holdings signalled the move via Twitter, which was boosted by some of MobileCoin’s earliest investors.

“So, at the same time as the shorter is trying to buy back tokens to close their short, traders are starting to buy up tokens to take a long position — creating a lot of demand and sending the price up over 100% yesterday,” said a source familiar with the matter.

Indeed, MOB’s pumping price inevitably begs the question: who’s profiting from such massive moves?

That depends on who is on the other side of the trade, our source explained. They offered two theories:

A whale got caught going too short on MOB, and either didn’t realise or care they might get stuck in that position. If so, CMS and anyone else trading against the whale benefits — alongside all MOB holders.
MOB insiders are using a contrived short squeeze to anchor an inflated price ahead of rumored exchange listings. If so, the same people benefit as in the first scenario — alongside anyone with an interest in MobileCoin.

The first theory seems most likely. Our source considered the second scenario a tinfoil hat theory “based on no evidence whatsoever.”

However, they added the situation did seem strange. Why would someone take out such a large and financially suicidal short position in the middle of a bull market, especially for a token that might soon be listed on more prominent exchanges than FTX?

Protos reached out to CMS Holdings for comment, but received only a GIF that read “IDK” from co-founder Daniel Matuszewski.

We also contacted MobileCoin founder Joshua Goldbard for his take. Goldbard said the project doesn’t comment on price action and maintained MobileCoin does not participate in “market dynamics” when pressed.

As for whether MobileCoin developers have considered offloading their cryptocurrency now that the price has exploded 700% since its FTX listing in December — no further clarification has been given at press time.

We also reached out to FTX but a spokesperson is yet to get in touch. We’ll look to include their statements where possible if they do, but we understand there’s simply not much the platform can do to further protect users from such market activity.

The MOB short squeeze isn’t over yet

With regards to our short-selling crypto whale, at the time of writing Protos understood they’d exited about half of their position as of recently. They’re also on track to close it out completely over the next two days.

In any case, the full extent of the damage to their bottom line is unclear.

Still, MobileCoin’s short squeeze speaks to the level of influence those with deep pockets wield over crypto assets, particularly small projects with illiquid markets and opaque supply data. Always do your own research.

None of this is investment advice. Don’t pretend it is.

Update 20:07 UTC, Mar 30: Since this article was published, Protos has learned the short-selling whale stopped closing their position at some point over the past 48 hours and left roughly 5 million MOB outstanding, worth about $200 million at current prices.

According to sources familiar with the matter “they likely either can’t close due to price impact or are unwilling to,” the problem being they’ll probably drive the price higher if they buy it back.

So, the status of our short-selling whale is looks like they’re either trapped by MOB’s current price or facing complete liquidation.