Possible Arbitrage Drives Bitcoin Price Up in Bitfinex
The popular virtual currency exchange Bitfinex offers Bitcoin with a 2 per cent premium. According to an investigation conducted by BitMEX Research, the premium of Bitcoin increased during the last week.
The situation started when the stablecoin Tether (USDT) declined a few cents from its $1 dollar pegging. Due to the fact that HSBC, the banking offering services to Bitfinex, had some issues with deposits into the exchange, all traders are requested to purchase or sell cryptocurrencies using Tether.
Alex Kruger, an important and recognized virtual currency trader and analyst explained that the decline in the price of USDT can be related to three factors. He mentioned that traders can be moving to audited and regulated alternatives such as Gemini USD and PAx, that traders are selling USDT to purchase cryptocurrencies and that there are some concerns about the banking partners related to Tether LLC.
Since Noble Bank and the confusing relationship between Bitfinex and HSBC, users do not know whether it is possible to redeem USDT at its base price of $1 dollars.
It is important to remember that Tether has been always involved in controversies regarding its funds and the audits conducted by the company. During the last months, no improvements have been made by the firm. Some time ago, Bloomberg reported that some investigations showed that Tether was used to manipulate Bitcoin prices.
Kruger commented on the matter:
“USDT can be redeemed at Tether for USD, yet Tether does not destroy the redeemed Tether, only takes them out of circulation i.e. only USDT in circulation are fully backed by USD: This could eventually pose a problem.”
Users can take advantage of the premium crypto prices now present on Bitfinex. Users can sell their virtual currencies on Bitfinex for USDT. However, there is a significant risk that the price of Tether will continue to fall under $0.98 dollars.
Bitfinex Premium Approaches $170.
It’s only going to get worse. The longer you wait to withdraw from Bitfinex, the more you’re going to lose. pic.twitter.com/DuBk6xi8QC
— Bitfinex’ed (@Bitfinexed) October 15, 2018
Tether has always been involved in similar problems. It will be very positive for the crypto community to have companies and firms that are regulated and that offer quality services to their users.