Citing data from blockchain research firm TokenAnalyst, Bloomberg reported on May 15, 2019, that the current boom in the price of bitcoin (BTC) might just be the consequence of investors withdrawing their holdings from large exchanges due to renewed ambiguity surrounding their financial health.
Bitfinex Tether Fiasco Could have Indirectly Pumped the Market
The study by London-based blockchain research company TokenAnalyst concluded that crypto withdrawals from major crypto exchanges including Bitfinex, BitMEX, Binance, and Kraken eclipsed crypto deposits by as much as $622 million over the past five days. The study found that Bitfinex’s net outflows in bitcoin and ether (ETH) were more than $1.7 billion since April 26, 2019.
Further, there is also the possibility that the price of bitcoin could have inflated as a result of excessive capital withdrawal from the troubled exchange Bitfinex and its closely affiliated stablecoin project Tether (USDT.)
As previously reported, the New York Attorney General’s (NYAG) Office accused iFinex Ltd. – the parent company of both Bitfinex and Tether – of inappropriately handling client funds to cover a business loss of approximately $850 million. In response, Bitfinex and Tether stated that the transfer of client funds was nothing more than a loan between the two partner entities.
Later, on May 2, 2019, in an affidavit filed with the Supreme Court of State of New York, Tether revealed that only 74 percent of its USDT was actually backed by cash and other short-term liquid assets.
This revelation further dented investors’ trust in the so-called “king of stablecoins” which reached a tipping point when they started demanding exchanges to delist the USDT token.