Assalamualaikum, there is a lot of manipulation in crypto market, so what are the views of mufti Faraz adam and other scholars on trade in manipulating market?
I was reading mufti faraz article of there are lot of junk coins in market which shariah not allowed us to trade , but if one trade on utility coins which have use case (as your crypto halal projects list) but there is also manipulation, mostly people not buy it for utility but on hype and then sell it after making money or whales are buy it and pump it to make their money, then if we know that coin will be pump because of people hype or whales are buying and we buy it and sell for some profit, so is it allow in shariah to trade?
WS,
Great question. A bit complicated to answer, but I’ll give it a go.
The entire crypto market today stands at $960B according to CoinMarketCap, which is just shy of a cool $1 Trillion. For such a young market we should expect a degree of manipulation, especially since it is unregulated and more importantly, full of novice/ retail investors that experts/ whales can take advantage of. Institutions have of course come in recently, but only account for a tiny fraction compared to other markets.
If we now look at LIBOR, which is the London Interbank Offered Rate, and served as the benchmark for over US$350 trillion in financial contracts worldwide. That’s $350 with 12 zeros after it. Or, something like 370 times the size of the entire crypto market. That regulated LIBOR benchmark was manipulated with traders and firms making $100’s millions, until they were caught several years later. And that happened within the a very regulated, well established financial market. Forget the fines of some $10B for those involved here, the point is manipulation occurs in most markets.
Using the above example, does LIBOR become illegal and haram because some traders manipulated it? Or is the act of manipulating the LIBOR that is the illegal/ haram part? I think in almost any comparable example, the unethical/ questionable act (manipulation, pump and dump etc) is the impermissible part and therefore haram, not the market that such an act occurred in.
Granted there are projects with a lot of hype, due to concept, marketing or a number of other things, but I could argue all of your “concerns” also apply to Bitcoin and ETH, so:
- Should Muslims avoid investing in bitcoin because whales have moved its price?
- Should Muslims have avoided investing in ETH when all the hype around PoW was going on?
I am not sure we need a scholar to tell us a pump and dump scheme is not permissible? A scam is a scam and such acts are not halal in any transaction, when buying fruits or Bitcoin or anything else.
We need to ensure that we do not participate in any acts of market manipulation/ pump and dump etc as they are clearly unethical/ haram. Any transaction that involves manipulation, misrepresentation or false information is not permissible in Islam.
Now, if a coin has been deemed as halal, you have done your due diligence and feel comfortable with the Shariah assessment and can also confirm that your trade/ transaction is halal, then there should be no reason preventing you from profiting from your own research, knowledge and market insight.
Hope this helps IA.
JazakAllah for this detailed answer.
So you think we can trade in manipulation and hype? I do spot trading in your shariah compliant crypto list but I’m super confused, As I’m not much in this technology and financial market but Little involve in crypto trading, I do learning in my free time also about web3. The confusion is that everyone now in crypto to make money not for decentralization because of voltalitiy and easy to trade and the early adoptors can make good money as manipulation is easy. I also want to take advantage of early stage but shariah allow us to do? Beacuse it’s one sum game, someone has to lose in order to make your profit. But same thing also apply in any trading like gold, stock market then it also should be halal.. But the question comes in mind that in stocks there is productivity and the weaIth is generate through it but in crypto money moving from weak traders to good traders just buying and selling on emotions. Candle wick go up and in seconds when people sell go down. I don’t know maybe this also in stock but not that much. I have read the fatwa of mufti if the asset itself is halal and have usecase so we can trade in it if we know the skill of trading. lets say ok we can trade in it if the asset itself is halal. But many professional in this feild says that only few projects will survive in future . Take an example of MANA has $1.3coin billion market cap and only 30 daily active users so it will probably not survive in future, but it’s still here because of youtube, Twitter hype. The project itself is halal and have use case. If I have doubt this project will not survive in future but now for short term people are trading on it , price is moving so can I trade on it?
There are lot of tokens have no roadmap just they do coding and marketing and launch there token. Obviously you guys add legit projects in your shariah compliant projects list, but can I ask you have professional in your team who can anaylize projects that this project is good and will stay in futre, no one can be 100% sure, But you know.
I’m not active and can’t research about every project and I’m not in this feild. But I’m doing small trading for my pocket money. If my doubt will clear and will continue my trading so can I trust you guys on the projects is legit. You have any professional in your team as I say no one can 100% correct. I have saw article on MANA and someone was saying NEBL has no fundamentals and it’s in your list so I’m …
Sorry for stupid questions, I’m too confused what should I ask hope you understand my questions.
Please share your knowledge on this and will be helpful if you provide me the views of the source you use for the verification of shariah compliant projects..
Sorry for very late comment it’s very tough for me to write this paragraph XD..