Wolf is coming? Big short Citron will continue to short ETH

Citron Research, a well-known short-seller, recently tweeted that the FBI's failure to investigate the second largest Democratic donor (SBF), allowing an individual to gain influence so close to the government without even checking tax returns, has national security implications.

Citron added, "What about the victims or account holders who want decentralization, but when your money is sent to the Bahamas?" This has reignited its short interest, and Citron will continue to short ETH, believing that the $130 billion Token has as many common-sense flaws as the SBF story.

After nearly two years, restart short

Citron Research is an influential short seller in the United States. Founded in 2001, Citron Research was formerly known as Stocklemon (Stock Lemon Network). It was founded by Andrew Left, a Jew with many years of trading experience.

The word "lemon" means something bad in English, which is why Andrew started the site in the first place, specializing in shorting stocks. The name was deemed too direct and was replaced by the French "Citron".

The usual methods used by Citron to short-sell include: first, to thoroughly investigate the gaps caused by the differences in financial auditing between China and the United States, including the falsification of sales income, etc.; Second, to examine the improper behavior of corporate executives; The third is to monitor whether the enterprises comply with the procedures, in accordance with the provisions of the regular report to regulators and public investors, etc.

More than 50 U.S. companies covered by Citron's research, including technology companies such as Raser Technologies and Bio-Heal Laboratories as well as biohealth companies, have been targeted for regulatory intervention in more than 150 of its shorting reports. In addition, Citron has a track record of shorting and end-business models, having targeted 20 large-cap companies in six years, causing 15 of them to fall by more than 66 per cent and seven to delist.

But when retail investors shorted GameStop (GME) in early 2021, Citron Research suffered the worst of its 20-year short selling career, and many Wall Street funds, including Melvin Capital and Citadel, also suffered a complete rout. Retail investors with WallStreetBets have made a name for themselves in US stocks.

Later, on January 29, 2021, Andrew Left, founder of Citron, publicly announced that he would terminate his 20-year short selling career, stop short research and focus on long opportunities, providing long-term long investment opportunities for retail investors.

But now, less than two years later, Citron has announced that it is back and will continue to short ETH, and all this has been triggered by the recent FTX crash, which has made it short again. Citron believes that ETH, with a market value of $130 billion, must have many common sense defects like FTX.

At 2:59 p.m. on Nov. 15, Citron's short position caused market volatility within a minute. According to Coinglass ETH net wide contract blowout data, there were more than $2.2 million of multi-single blowout during the period, but that was dwarfed by the hundreds of millions of dollars of blowout when crypto markets were moving differently, and the open single blowout was less than $50,000.

Crypto has a long history, don't understand decentralization

However, after Citron Research commented on FTX and published the short ETH news, it was ridiculed by many investors.

Instead it's a centralised exchange where users' assets are managed by people on the Stupid trading platform. Interestingly, all debts owed by FTX on the decentralised platform have been paid in full. Why?

'You can be short, but why have you been flipping a coin,' another investor said, Posting Citron Research's returns over the past year.

And even more, he doesn't forget to unpick Citron's wounds: "It's like you know the benefits of shorting GME better than anyone else."

In fact, Citron Research is not just a recent bet against ETH, it has a long history of betting against encryption.

The last time ETH fell to $1,150, Citron publicly shorted it on Twitter, saying it could fall to $200 (though that's still expensive), according to investors. However, the ETH price rebounded after 3 days and exceeded $1600 in about two months.

Citron also tweeted about encryption, BTC and ETH several times in the middle of this year.

Citron says there is a lot of fraud in the crypto world. BTC has the collective simplicity of perceived value, which is a choice for some, but not the utility; ETH, or smart contracts, has no place in the complex world we live in. Its main purpose is to buy online collectibles, but it has a market value of $140 billion.

"Then there are the VCS in Silicon Valley who collectively sold the Web3 concept, but they will never be held accountable for the statements they sold to an unsuspecting public over the past few years."

The former "Wall Street Bounty Hunter"

Much of the reason Citron Research is so bearish on encryption comes from its founder, Andrew Left.

When asked at a conference about financial markets that he thought were potentially fraudulent, Andrew told the audience bluntly: "I think encryption is outright fraud over and over again."

While it has since been commented in the media: Andrew started his career with the good intentions of exposing controversial companies, unfortunately, as the GME incident demonstrates, he still seems to be thinking about things in an overly limiting way of thinking that relies on a set of values that are about to become obsolete. But it seems Andrew's views on encryption have not changed.

This time, however, retail investors are not buying Citron Research's short ETH statement, despite the fact that the crypto market is currently in a bear market and the FTX incident has caused continuous tremors in the industry.

In addition, the aggressive big short and "Wall Street bounty hunter" has run into considerable regulatory trouble, and his fellow funds have also been caught up in the regulatory quagmire.

In December, the FBI raided the home of Andrew Left and the Justice Department launched a broad criminal investigation into short selling by hedge funds and research firms, including Citron, There is evidence that Andrew's Citron Reports were used by those illegally shorting hedge funds, though Andrew denies any wrongdoing.

In response, the Justice Department also subpoenaed records from nearly 30 Citron investment and research firms, The list includes Gabe Plotkin, founder of Melvin Capital, Nate Koppikar of Orso Partners, Nate Anderson of Hindenburg Research and other financial titans. In May, Melvin Capital, which had an $8 billion AUM, closed its fund because of GME's massive losses.

Therefore, it is foreseeable that despite Citron Research's high-profile announcement of shorting ETH, the impact on the crypto market will be limited in both the short and long term.

However, it reflects from the side that the FTX event in the crypto field has indeed spread to a wide range, which has been transmitted to the traditional financial circle and caused a huge impact, but also triggered a huge concern of regulators. But the hope is that regulators, while stepping in and filling regulatory gaps, will conduct more effective market surveillance, leaving room for crypto practitioners to innovate.

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