- Major exchanges have seen an increase in Bitcoin outflow during the current bull run
- The rapid increase in prices could be linked to the recent Bitfinex scandal
- Tether may be affecting Bitcoin prices, and other traders may fear lockdowns similar to that imposed by Binance
Bitcoin has been outperforming every financial asset out there lately. The world’s number one cryptocurrency has been touching yearly all-time-highs and has risen up to 30 percent over the last week. But this humongous bull run has suppressed the fact that the recent capital outflow rates are exceeding the inflow rates on some of the most popular digital-asset exchanges in the industry. This may seem fairly normal to the eyes considering the tremendous rate at which the prices of most of the cryptocurrencies are swelling, but one mustn’t disregard the fact that the cryptocurrency market has seen countless allegations of fraud and manipulation ever since its conception.
Traders taking their Bitcoin off of exchanges
According to latest reports by Token analyst, the London-based blockchain data provider, major exchanges like Bitfinex, BitMex, Binance, Kraken show a difference of about $622 million between inflow and outflow over the last five days. History bears witness to the fact that investors always prefer Bitcoin because of its high liquidity. The recent price hike may have been influenced by the fact that the controversial exchange Bitfinex and its affiliated stable coin Tether was alleged of hiding losses of $850 million as reported earlier by the blockchain reporter. Data from Token analyst states that Bitfinex has seen more than $1.7 billion worth of Bitcoin and ether move from the exchange sever since the New York’s attorney general charged the companies about engaging in a cover-up. The alleged parties, however, claim that this was a mere loan in Tether that was used to recover from the loss they had suffered as mentioned earlier. On the 30th of April, the institution behind Tether and Bitfinex reported that the stable coin is also backed by cash and short-term securities and is not completely pegged to the U.S. dollar. This was a surprise because most of the traders considered Tether to be fully backed by Dollar and used it widely as an intermediary in crypto trading. John Griffin, a finance professor at the University of Texas and one who has studied market manipulation said:
“Since Tether is insufficiently backed, it means that some of the reserves backing customer assets on exchanges are likely insufficient, so smart customers will not custody their funds on exchanges and pull their crypto off exchanges. This could put further upward pressure on Bitcoin prices as one would rather take fake money and exchange it to Bitcoin.”
Trading at a premium
As reported previously by the blockchain reporter, ever since the news about Bitfinex raising an equivalent of $1 billion via an Initial Exchange Offering (IEO) of a token called ‘LEO’ surfaced, Bitcoin traded at a premium of up to 6 percent on Bitfinex at the cost of other coins depreciating in value because of the Tether scandal.
This, however, wasn’t the first of times where Tether affected Bitcoin prices. A paper by John Griffin shows how to tether transactions are timed during market downturns and as a result, a sizeable increase in Bitcoin prices is seen. Another paper by Wang Chun Wei of the University of Queensland Business School, argues that Tether does not have any impact on Bitcoin prices. In the study, a VAR model was created to illustrate both Tether and Bitcoin trades to show their influence, or lack thereof, on each other. This has been one of the biggest controversies in the cryptocurrency community but there have been no solid reports on either of the aforementioned topics.