Bitcoin (BTC) has recently fallen from $5,650 to $5,250 after some legal issues that iFinex, the parent company of Bitfinex and Tether (USDT), experienced. The New York Attorney General’s (NYAG) office is currently investigating financial movements performed by Tether and Bitfinex. Nonetheless, Bitcoin did not behave as many would have expected.
Bitcoin’s Strength Shows Strong Positive Sentiment
At the end of the last week, the NY Attorney General’s office stated that iFinex could have been defrauding investors that deal with virtual currencies. As per the report, Bitfinex tried to cover $850 million in losses with cash reserves from Tether’s treasury. These funds should always be available to sustain Tether’s peg with the US dollar 1:1. This shows that Tether was not backed 1:1 and that the stablecoin could have lost its peg.
Although this shocked the market, Bitcoin remained relatively stable for such negative news. Bitcoin fell around 7%, when other digital currencies registered larger losses during the same period of time. At the same time, Tether lost its peg with the USD falling over 3% in some exchanges.
In the past, when Tether lost for a short period of time its peg with the USD, Bitcoin skyrocketed. Most of USDT users moved to Bitcoin (BTC), which is one of the most stable virtual currency in the market with the exception of stablecoins.
Thus, Bitcoin has barely reacted to the news regarding Tether’s and Bitfinex’ legal issues. According to Chris Burniske, a partner at the venture capital firm placeholder VC, said on Twitter that he is impressed with how Bitcoin has held given the Tether news.
— Chris Burniske (@cburniske) April 26, 2019
He went on saying that selling off after bad news is something that it is expected in a bull market – even when he does not consider to be in one of these bull trends yet. However, the non-reaction of Bitcoin has surprised him on the sentiment that there is in the market.
He has also mentioned that Bitcoin needs to retrace to $4,000 or the 200 week SMA to have a rock solid base for the bull market to come. This could also be one of the latest opportunities to enter the cryptocurrency market in 2019.
According to Jeff Garzik, co-founder of Bloq Inc, explained that this is an exit buying. When users get out of an exchange they must buy hard currency such as Bitcoin when withdrawal methods start failing. Thus, he said that Bitcoin price is higher at dying exchanges.
It's exit buying. To get out of an exchange, one must buy "hard currency" – BTC – when fiat withdrawal methods start failing. The BTC price is therefore higher at dying exchs.
We've seen this data pattern many times in past crypto history, including but not limited to MtGox.
— Jeff Garzik (@jgarzik) April 26, 2019