Problems with Bitfinex - what happens to the exchange and is it safe to work with it?

The popular cryptocurrency exchange Bitfinex once again found itself in the center of a major scandal. And though the site is no stranger to various thefts, hacker attacks and other troubles, now the scale of the problem is much more global. At stake is not only the reputation of the exchange, hundreds of millions of dollars of its customers, but also Tether cryptocurrency, which seems to have lost its security in dollars.

What do we know about Bitfinex?

Bitfex is one of the largest cryptocurrency exchanges, the turnover of which exceeds 100 $ million per day. It is this trading platform that many traders use to make transactions with cryptocurrency, it is on it that many keep their savings and, through its functionality, buy certain coins. The exchange has been operating since 2012 of the year and is considered quite influential in the world of cryptocurrencies - moreover, it is precisely its manipulations with the price of Bitcoin that are called the main factor in the rise in price of this cryptocurrency at the end of 2017.

Bitfinex can not be called the safest and time-tested crypto-gambling. In addition to course manipulations and accusations in connection with Bitfineks with Tether cryptocurrency, the exchange was hacked and robbed by hackers more than once, and the sums were quite impressive and amounted to tens of millions of dollars. All this did not prevent Bitfinex from gaining great popularity and worldwide distribution, the love of traders and large amounts of daily turnover.

Where are the 850 $ million from Bitphinex?

For a long time, the site showed itself at its best and came out dry from numerous scandals and accusations. But 2019 started the year for Bitfinex not very brightly, but it all started with minor problems with the withdrawal of funds. In fact, it turned out that this was not just a technical failure, but a serious financial crisis inside the exchange, which Bitfinex’s management had successfully concealed for some time.

Very interesting is the fact that the problems of the marketplace were reported not by its administration, but by law enforcement agencies. It turns out that Bitfinex transferred a huge amount of 850 $ million to the payment provider Crypto Capital Corp. For unknown reasons, the aggregator withholds these funds, claiming that the money was confiscated by the authorities. In fact, it looks more like a typical scam.

The fraudster is actually Crypto Capital or not, but the stock exchange has a serious shortage of funds - a real hole in the budget. Apparently, fearing the hype and mass conclusions, the Bitfinace management concealed this problem, not forgetting, in the meantime, to cash out the contents of their cold wallets worth 170 $ million.

Communication Tether and Bitfinex

It is no secret to anyone in the cryptoindustry that Bitfinex and Tether cryptocurrency have common shareholders and management - this has already been confirmed at the official level, although initially both parties denied their close relationship. Tether, he's a cryptodollar, he's USDT - a unique cryptocurrency, the coins of which are fully secured by the dollar. Coin has a fixed exchange rate almost equal to the dollar and was created specifically to enable the exchanges to work with the dollar with ease and without problems with the law. For several years, this was exactly the case - the cryptodollar was actively used in everyday life and was used for its intended purpose, but after the events described above, it turned out that not every coin in the Tether system corresponds to the evergreen dollar in the account of cryptocurrency in the bank.

As the New York public prosecutor’s office found out, Bitfinex “borrowed” about 700 $ million from Tether, borrowing this amount from the reserve, which the coin provides. The management decided to close the budget deficit with money from another project and hoped to hide these manipulations from the public. After the accusations, the representatives of the exchange denied everything, but put the change of information on the official website of Tether into place.

If earlier the project’s policy stated that the cryptocurrency was fully provided with dollars, then after the revisions, in addition to fiat funds, the list of collateral contains cash equivalents and “other assets”. Just the other day, followed by an official statement that Tether is supported by cash only 74%.

What will happen to the exchange and cryptodollar now?

Events around the Bitfinex exchange caused panic among its customers and currently there is information that over the past five days, users have withdrawn about 600 $ million from their accounts. Clients are reasonably afraid of the site’s bankruptcy and are trying to protect their money. The position of the exchange is aggravated by the fact that this time the close attention of law enforcement agencies is riveted on it. 

Analysts and experts are inclined to believe that Bitfinex may be declared bankrupt. In turn, this may lead to a shortage of liquidity in the market, and will also be the impetus for a more tightened regulation of the cryptocurrency sphere. The management of the exchange must be given its due - the administration maintains composure and not only generates positive news about future plans, but also tries to attract users in every way.

For example, April 28 bitcoin bitcoin price was $ 350 higher than on other trading platforms. True, such a maneuver was difficult to dispel the panic of customers who still preferred to request money for withdrawal. The reason for the sharp rise in price of the cue ball on Bitfinex is called manipulation by the exchange, some explain this course by the fear of the clients of the site to keep money in Tether.

As for the opinions of experts about the future of Tether, the predictions for cryptocurrency are more optimistic. Although the coin is now not fully secured by the dollar, but only by 74%, but this is not critical. For example, fiat currencies are not supported at all and this does not prevent them from being popular and having value. Therefore, it is not necessary to assume that now the cryptodollar will come to an end - in the fragile world of cryptocurrencies it is one of the most stable coins, which so far has no worthy alternative.

Do you use Bitfinex exchange services? At the moment, the position of the trading platform is very ambiguous and one cannot exclude the risk that the exchange will become bankrupt and its clients will lose money. Therefore, it is better to refrain from operations on Bitfex and, if you keep funds on the exchange, it is better to withdraw the cryptocurrency from the system.