(Editor’s note - We have been out of action for the past two days. Just product stuff keeping us busy, too many things on that front reaching boiling point! As a rule of thumb, we have decided that while the general focus will be to send out a daily newsletter, if we are rushed for time, or if we do not have anything interesting or relevant to add, we are just going to stay silent and save everyone’s time and effort, in edition to making a small dent on global warming).
In today’s edition, we share with you some interesting reads that informed our thinking this week, before delving into the standard Friday DeFi watch.
The report does a good job of summarizing the key themes in crypto heading into Q2 and beyond. The report also does a great job of breaking down the key themes (stablecoins, Open Finance, Security Tokens, regulations etc), at a very high level.
And now onto all things Bitfinex and Tether.
Bitfinex is back in the news for the wrong reasons again. Bitfinex was earlier accused of insolvency in the second half of the last year as it was widely speculated that the USDT-issuer did not have sufficient USD bank deposits to back the outstanding USDT in circulation when its banking partner Noble Bank offered itself up for sale.
This lead to a massive selloff and the price of USDT traded at a significant discount to the dollar as questions were raised about the legitimacy of the overall project. USDT fought back against the allegations and hired a new banking partner, putting a temporary stop to the constant negativity about its sustainability in the media.
This time around Bitfinex has to deal with a much harder blow; It is the New York State Attorney General that it is investigating iFinex,
the company behind Bitfinex, as the company is accused of defrauding investors to the tune of over $850 million. The NYSAG is investigating if there was a loss of $850 million that was not disclosed to investors. The $850 million was allegedly given to Panama-based Crypto Capital which handled the withdrawal processes for Tether. When Bitfinex realized that it had lost access to those $850 million, the company, unbeknownst to its investors, tapped into the Tether funds that back the USD stablecoin USDT. Given USDT’s prominence in the crypto ecosystem, the news resulted in a run on Tether, as mass withdrawals of USDT ensued on various exchanges, leading to a temporary ban on withdrawals and the drop in price of USDT and other major cryptocurrencies as well. Given that BTC/USDT is the largest Bitcoin trading pair in terms of volume, we might expect traders to sell off their USDT for BTC or any other liquid cryptocurrency such as ETH in the short term, which could lead to a rise in prices in the short run. Immediately after the news of the NYSAG action came in, Tether was trading down at as much as 0.9680 and bitcoin was down almost 10%, although it has now recovered some of its gains.
We wonder if it might have been an inopportune moment to have listed USDT (the ERC-2- version of Tether) on Fordex!