Bitcoin has had a relatively good April, all things considered. That was until the events with the NY Attorney General’s office alleging that Bitfinex has covered up an $850 million loss. This is just another bit of bad news that has created FUD throughout the month as Bitcoin continued to rise.
What does the report say?
Interestingly, the report shows that Bitfinex did have the required reserves for their Tether stablecoin. This was until they gave $850 million to Crypto Capital. What they have done with the funds is yet to be known but they are not with Bitfinex anymore.
This means that Bitfinex have taken a loan to cover their losses. In essence, one Tether currently back by 75% dollars and 25% credit makes the true value $0.75. They are now operating more as a traditional fiat bank.
The debt might not be all doom and gloom, however. Bitfinex has consistently made profit so they should be able to pay off the debt that they now owe.
Timing of the news is unfortunate, with Bitcoin reaching key resistance levels. Whilst many longs have now been rekt, the Bitcoin price hasn’t reacted too badly. The fallout of such news though is yet to fully play out.
Many cryptocurrencies are tied to the fate of Tether so there is no doubting it’s importance. Many exchanges including Kraken, Binance and Poloniex will all have large holdings of the stablecoin and, should more unfortunate news arise, it could be a dramatic issue.
FUD seems to follow Bitcoin whenever its price appears to be recovering. Rumours earlier this month of countries banning Bitcoin mining also made a reappearance for the first time in aeons. Despite consistent negative rumours, Bitcoin is earning its moniker as the “honey badger” more and more as it refuses to react too dramatically.
Which way the Bitcoin price will move now is once more up in the air. Be assured though, if Bitcoin does recover and start to rally back up expect to see the same old tired arguments reappear in an attempt to create FUD.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.