On Thursday, 25th April, the cryptocurrency market saw a huge drop of around $10 billion due to allegations that Bitfinex covered up an “apparent loss” of $850 million in client and corporate funds.
Currently, the New York Attorney General (AG) is conducting an investigation into Tether and Bitfinex and this recent development highlights some glaring issues in the crypto world.
You may be wondering why the AG is investigating both Bitfinex and Tether. Well, Bitfinex is one of the largest crypto exchanges and the CEO is also the CEO of Tether: JL Van Der Velde.
This comes as a big blow to many traders as they rely on Tether to trade cryptos. Not all exchanges offer crypto pairs with USD as that results in more tax, reducing profits for the exchanges.
Tether is meant to be pegged to the dollar and usually stays in a tight range around that value of 1 to 1 with the dollar.
However, Tether’s value fell to as low as $0.95, signalling a big sell off and lack of trust in Tether. The ramifications of this could be long lasting – it certainly is having a large impact on many traders using it.
Tether and Bitfnex are under the microscope right now and it would not be a surprise to see both taken down if change is not brought about.
This isn’t all the bad news though. Tether has been investigated in the past by the U.S. Justice Department for manipulating the price of Bitcoin.
There is a history of shady and untrustworthy actions from these companies which should signal a red flag for you. If you are holding any cryptos with Bitfinex, we strongly recommend you to move your assets as soon as possible.
These are all serious allegations and bring us to the big question of regulation.
At cryptos4noobs, we have been consistent in our belief that regulation is required in the cryptocurrency space. Tether and Bitfinex are an example of how people are taking advantage of low regulation to earn monumental sums of money.
You have to look after yourself when you enter the crypto space for this exact reason. It’s not only the lack of regulation that is being targeted, but traders and investors as well.
Complex fees and account charges can leave you with nearly no profit if you don’t know what you are doing.
Overall, this is not the best look for the crypto space. Fortunately, the crypto community is a passionate one and is looking to eradicate these bad behaviours by a minority of people.
Using our value as investors and/or traders can have an impact. Using exchanges and wallets that carry out a business mantra that is conducive to growth and not gaming the system is important.
Otherwise, the negative effects of this brazen behaviour by companies just impacts us the most. Take a look at all these charts and the effect that this one piece of news has had on the market.
Over $20 million has now been moved out of multiple wallets on Bitfinex’s platform, showing the immediate lack of faith that traders have responded with, and for good reason.
The response to this news also had a positive effect on other stablecoins such as Gemini’s GUSD whereby their values have actually increased to over $1.
However, how do we know that similar bad practices won’t be carried on by these other companies who have stablecoins?
The lack of regulation and understanding of the crypto space is causing problems. There are too many shades of gray that companies are using to their advantage.
It is vital that you look out for yourself in this space. News events like these are exactly the reason why we strongly suggest that you stay up-to-date with crypto news if you want to invest or trade in cryptocurrency.
The future is uncertain for exchanges and we could see an example be made out of Bitfinex and Tether.
Whichever way it unfolds, you could expect to see regulatory standards be introduced based off of the actions of a few greedy hands.