Bitcoin Bounces Following Bitfinex Fraud Allegation
Despite the toll news of a fraud claim against Bitfinex exchange and Tether, the value of the top cryptocurrency bitcoin seems to be bouncing back to its recent peak.
Early Friday April 26, Bitcoin price dropped by about 6% to $5189. The drop comes as the New York Attorney General’s office set out to open an investigation into both Bitfinex and Tether on allegations of having “undisclosed, conflicted transactions to cover Bitfinex’s losses by transferring money out of tether reserve funds”. As at the time of writing, the price is crawling back in the $5275 – $5300 range which shows a quick retracement in a 24-hour period.
Not much news has swayed the crypto market of late until court papers became public a day earlier. The price reversal may be sustained as the accused have put up a fight. Bitfinex has refuted the NY AG’s office claims saying the court filings “were written in bad faith and are riddled with false assertions”.
“…both Bitfinex and Tether are committed to fighting this gross overreach by the New York Attorney General’s office against companies that are good corporate citizens and strong supporters of law enforcement. Bitfinex and Tether will vigorously challenge this, and any and all other actions, by the New York Attorney General’s office.”
While this has seem like negative for the crypto market which has been fairing well of late, some think it could mean bullish for Bitcoin eventually. This is based on the belief that a problem with Tether’s flow is usually considered good for Bitcoin as users tend to seek Bitcoin as an alternative to move money around. So far, Bitcoin’s dominance in the crypto market has grown by almost 3%.
A scratch on Tether always reflects on the crypto market because several cryptocurrency exchanges take risk on it as a stablecoin. It’s the closest cryptocurrencies can get to the US dollar – at least up till this moment. Whereas, most, if not all major crypto exchanges want to offer USD pairs to main cryptocurrencies like Bitcoin.
Tether helps generate more volume than just crypto-to-crypto trading pairs. It also helps open up new markets as the US dollar is accessible in most parts of the world. However, to offer the USD as a trading pair, exchanges have to enable making deposits and withdrawals in US dollar through a US or a US-approved bank which has not been possible.