Crypto Weekly Recap: Bitcoin Avoids Flash Crash amid Bitfinex Allegation
Bitcoin (BTC) and the broader cryptocurrency market have undergone a sharp correction on Friday, with the large majority of the selloff occurring in less than an hour during Asian trading. The decline dragged most of the top cryptocurrencies into double-digit losses for the week, though bitcoin has managed to break-even as prices recovered quickly.
The sudden selloff followed news that the New York Attorney General’s office is pursuing legal action against iFinex Inc., the operator of crypto exchange Bitfinex, for using the Tether (USDT) stablecoin to mask the loss of $850 million. As Hacked reported well over a year ago, Bitfinex has been under federal investigation for quite some time over its alleged misuse of USDT to inflate bitcoin’s price during the 2017 bull market. In fact, the U.S. Commodity Futures Trading Commission (CFTC) subpoenaed both Bitfinex and Tether over the matter. It was later learned that both companies shared the same CEO.
Read more: Cryptocurrency Market on High Alert as CFTC Subpoenas Bitfinex, Tether.
Crypto Markets See Sudden Correction
The cryptocurrency market declined sharply in the Asian session, falling to a low of $167.3 billion. The bulk of the selloff occurred in the span of less than an hour beginning at around 17:37 UTC. Prior to the drop, the total market cap was well north of $178 billion.
With the exception of Binance Coin (BNB), all major cryptocurrencies reported declines. This included a 5% correction for Ethereum (ETH), bitcoin cash (BCH) and Cardano (ADA). Tezos (XTZ), a high-flying small cap, corrected nearly 10% lower on Friday.
As a result of the swift drop, nearly all of the top coins registered weekly declines of 10% or more.
Bitcoin’s Dominance Grows
Bitcoin wasn’t immune to the market correction on Friday, though it fared much better than most of its peers. The largest and most influential cryptocurrency declined 3.1% to $5,293.31, according to CoinMarketCap. For the week, BTC printed a very modest gain.
By holding up better than its competitors, bitcoin’s dominance rate has strengthened to nearly 55%, the highest since December. At last check, bitcoin’s dominance rate was 54.8%. This means more than half of the crypto market capitalization is held in bitcoin.
The leading digital currency briefly traded above $5,600 this week for the first time since November, bringing its market cap closer to $100 billion. Read why bitcoin maximalism is growing.
Bitfinex Saga
As CCN reported Thursday, the office of New York Attorney General Letitia James has filed a lawsuit against Bitfinex’s operator and requested that the exchange cease its operations in the state.
From the Attorney General:
“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘Tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds. New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.”
Tether has been a source of significant controversy in the cryptocurrency market because, unlike other stablecoins, it does not conduct regular public audits. This means investors and regulators have no way of knowing whether USDT is backed by a commensurate value of U.S. dollars or its potential outlays and receivables.
Tether attempted to quell those concerns in November by announcing a new banking partnership and confirming a balance of $1.8 billion in its reserves.
IBM Blockchain Powers Mineral Collaboration
German automaker Volkswagen announced last week that it has joined an “open industry collaboration” to ensure that manufacturing minerals are sourced responsibly. To achieve that goal, the industry collaboration will rely on IBM Blockchain to provide access to immutable data across the manufacturing supply chain.
In addition to Volkswagen, the partnership includes Ford Motor Company, Huayou Cobalt and LG Chem. Read more – IBM Blockchain Gets Another Customer: Volkswagen. What Does this Mean for Mass Adoption?
IBM has quickly emerged as a global leader in blockchain innovation. The tech giant is on the leading edge of major innovations in decentralized payment systems, stablecoins and even carbon credit cryptocurrencies. IBM says its World Wire platform for instant cross-border payments is available in 72 countries, 57 currencies and 44 banking endpoints.
The Week Ahead
Although bitcoin appears to be well supported at current levels, the fallout from the Bitfinex saga could impact investor sentiment and create more volatility in the market. As of Friday, Bitfinex was the 29th largest cryptocurrency exchange based on adjusted volume.
Bitcoin is still on track for its third consecutive monthly gain, which should be considered a major feat following the year-long bear market. Based on historical trends, bitcoin’s upside momentum could continue for another two-to-three months before the next major shakeout occurs.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.
Gloss