Category Archives: bitfinex

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Bitfinex Users Claim Fiat Deposits Halted

Troubled cryptocurrency exchange Bitfinex has apparently halted all fiat deposits to user accounts, if anonymous sources reporting to The Block are correct. The biggest USD to Bitcoin exchange in the world recently ended its relationship with Noble Bank in Puerto Rico – a bank on the brink of bankruptcy – but has been keeping its business afloat via a private account at banking giant HSBC.

There is no official word from Bitfinex’s blog or Twitter about this fiat deposit suspension but similar reports confirming the same can be found on Twitter. There appears to be a note on Bitfinex’s website saying fiat deposits are indeed halted, and that this should be resolved within a week.

Bitfinex’s EUR, USD, JPY, GBP wire deposits are temporarily paused.
Things are expected to resume in a week.$BTC #Bitcoin #Bitfinex

— Squeeze (@cryptoSqueeze) October 11, 2018

Another thing which may confirm this news is a USD 100 trading premium on Bitfinex, nearly 2%, versus the other major USD exchanges Coinbase and Bitstamp. Generally, the USD price of Bitcoin is nearly the same on these exchanges but in the last few days, a divergence began to develop. This is possibly caused by traders trading funds into Bitcoin to get their funds off of Bitfinex, since if fiat deposits are disabled, that means fiat withdrawals probably aren’t working very well or at all. The Bitfinex subreddit is filled with mixed reviews, some which say withdrawals are working, others which say they are not. Another possible indication of this is the spike of Bitfinex’s daily trading volume up to USD 663 million as of 11 October 2018, well above their normal trading volume.

Previous reports indicate that Bitfinex had begun using a private bank account under the name Global Trading Solutions at banking giant HSBC after severing ties with Noble Bank, a bank they only recently began using after losing their Wells Fargo accounts in 2017. Bitfinex refused to comment on its relationship with HSBC and it is possible HSBC wasn’t aware that Bitfinex had begun using the bank for fiat needs.

It was further speculated that HSBC told Bitfinex to stop using the account after the news hit mainstream crypto media, leading to the current situation where deposits are not possible. Bitfinex previously asserted on 7 October that everything was fine with it and that all fiat deposits and withdrawals were functioning; obviously, this situation has changed.

Bitcoin had been very stable near USD 6,600, with some slight fluctuations, during the month of October 2018. However, this changed on 10 October with a sudden drop to USD 6,200. This drop continues today and now Bitcoin’s price is approaching USD 6,100. It’s possible that the halt of Bitfinex’s withdrawals is playing a role in this price drop since the lack of functionality of the biggest USD to Bitcoin exchange in the world is cause for concern for traders.


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Bitfinex Partners with HSBC After Banking Woes

Bitfinex has secured a banking relationship with HSBC, according to Larry Cermak who is Head Analyst at The Block.

The largest USD Bitcoin exchange in the world with over USD 100 million of daily trading volume has gone through serious banking problems since 2017 when Wells Fargo dropped Bitfinex. In May 2018, Bitfinex partnered with Puerto Rico’s Noble Bank, a bank which is now about to go bankrupt. Despite its new relationship with HSBC, the 7th largest bank in the world with more than USD 2 trillion of assets, the exchange continues to battle negative skepticism regarding its insolvency, and deposits and withdraws in all currencies besides USD are disabled on Bitfinex for the time being.

Apparently, Bitfinex has a private account at HSBC under the name Global Trading Solutions, but its director of communications, Kasper Rasmussen, will not officially comment on this.

In 2017, the exchange was located in Taiwan when Wells Fargo closed its account. Bitfinex filed a lawsuit and said, “The decision to initiate legal action is because we cannot allow precedents in this industry where clearing houses can disrupt businesses that are by all metrics complying with the rules in place. If we allow them to simply flip a switch and disrupt business, then there becomes a precedent in the Bitcoin industry beyond just Bitfinex, so we believe it is the appropriate time to take action.”

Bitfinex moved to the Caribbean in May 2018 and set up a relationship with Noble Bank of Puerto Rico. Now that relationship has ended, with Tether Limited moving Tether’s bank accounts out of Noble Bank; the nail in the coffin that could cause Noble Bank to go bankrupt. Tether Limited has confirmed that funds have been moved to other banks but of course, such a drastic change in Tether’s banking has caused uncertainty.

Apparently, Bitfinex’s cold wallet has decreased by BTC 75,000 during the past month and combined with some customers reporting slow withdraws from its platform, this raises suspicion that the exchange has serious problems. However, considering that it is in the process of changing banks, it can be expected that withdraws would be delayed. Bitfinex asserts that they are not insolvent, withdraws are functioning, and Noble Bank’s collapse won’t affect operations.


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New York Report Points to Improvement Areas for Crypto Exchanges

The New York Attorney General’s office published a report this week that investigates the practices of cryptocurrency exchanges in the state.

It was undertaken on the basis of protecting and informing residents, with evidence conclusively pointing to areas that exchanges need to improve in order to ”ensure the fairness, integrity, and security of their exchanges”.

The ten exchanges that chose to participate in the Attorney General’s report include Bitfinex, bitFlyer USA, Bitstamp, Bittrex, Coinbase, Gemini, itBit, Poloniex, HBUS and Tidex. Of these platforms, just Bitfinex, Tidex and HBUS are not regulated by the New York State Department of Financial Services.

The report claims that some exchanges have failed to implement standard investor and consumer protections; this including adequate security measures as well as market surveillance protocols.

One aspect of this pointed to is an apparent lack of measures to impede ”abusive trading activity”. While the report acknowledges some exchanges have steps to implement safeguards and ”police the fairness of their platforms”, this cannot be said for all of those that participated in the study. The lack of market surveillance capabilities such as those found in traditional trading venues is said to restrict their capabilities of identifying and putting a stop to suspicious trading patterns.

Despite these criticisms, the Attorney General’s office is not looking to shut down or restrict any of their operations. Rather, the report has been conducted to help educate New York-based customers, and encourage the cryptocurrency marketplace to review its own flaws in order to preserve the integrity of transactions.

Should exchanges choose to ignore the advice and not adjust policies of their own accord, in the future the Attorney General’s office may well take legal action against the exchanges.

”As the sector matures, the OAG expects responsible trading platforms – in coordination with consumer advocates, regulators, and law enforcement – to expand the transparency, security, fairness, and accountability of their businesses,” it reads.


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Bitcoin Whale Watch: USD 380 Million Leaves #1 Bitcoin Wallet In Only 4 Days

Bitcoin whale watch is in full effect since 58,550 bitcoins worth approximately USD 380 million left the biggest Bitcoin wallet in only 4 days. The wallet in question is the Bitfinex cold storage wallet, and based on the blockchain records, this sort of outflow in such a brief amount of time is highly unusual. Remarkably, despite the huge amount of Bitcoin sent out of the wallet, it is still the #1 Bitcoin wallet with 170,500 Bitcoins worth approximately USD 1.11 billion.

There are speculations among the Bitcoin whale watchers that such large movements of Bitcoin could precede a dump. That is possible if this Bitcoin is going from Bitfinex’s cold storage to a hot wallet in preparation for a dump. However, according to data on Bitcoinwisdom, there is no indication of such a large amount of bitcoins being dumped on Bitfinex. This large outflow of Bitcoin from the cold wallet was completed on the 13th of September 2018; it’s been 3 days since then (as at the time of this writing).

In a more optimistic scenario, perhaps someone has decided to hodl this USD 380 million of Bitcoin in anticipation of a rally in the long-term and has moved the bitcoins from the exchange to their personal wallet. Another possible scenario is that this just represents Bitfinex moving coins around for unknown management reasons, perhaps making their hot wallets more liquid, or in preparation of a business deal.

The reality, however, is that no one knows for sure what is going on, and it isn’t worth speculating since there are so many possibilities. Even if this was the worst case scenario and these bitcoins are meant to be dumped, it wouldn’t affect the market much because every single day there are several billion in USD of Bitcoin trading volume on spot exchanges worldwide.

One remarkable aspect of this USD 380 million worth of Bitcoin outflow from the Bitfinex cold wallet is that they only paid USD 120 as fees, or 0.00000315% and the fees paid were much higher than they had to be, probably for security reasons. No fiat payment method in the world offers low fees comparable to Bitcoin. Fees for sending USD 380 million via banks could easily cost more than USD 1 million.

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Shorts on Bitfinex Near Record Highs, Could Trigger Short Squeeze

Short sell positions on Bitfinex, the biggest USD to Bitcoin exchange in the world, are nearing record highs. As of 21 August 2018, there were 39,524 shorts on Bitfinex, just below the record of 40,719 shorts on 12 April. This could lead to a short squeeze and a rapid rise in Bitcoin’s price, which is what happened on 12 April when Bitcoin’s price rose USD 1,000.

Shorting Bitcoin means a trader is betting on Bitcoin’s price going down. This is the opposite of a long, which is when a trader holds Bitcoin and expects the price to go up. Shorts are accomplished via borrowing Bitcoins through an exchange and converting them to USD, then buying the same amount of Bitcoins for a cheaper price to pay back the loan when Bitcoin’s price relative to USD declines.

The massive amount of short orders on Bitfinex makes conditions prime for a short squeeze, especially since 16,000 of the short orders were opened below USD 6,700. This means if Bitcoin rises to USD 6,700 these short orders would likely have to close to avoid losses, and when shorts close that causes an increase in Bitcoin buying pressure to pay back the loans.

A short squeeze happens when the Bitcoin price rises, causing short positions to close and buy back Bitcoins. The buying pressure from covering short loans causes the Bitcoin price to rise even more, causing more shorts to close, and the Bitcoin price goes even higher. This is a positive feedback loop that can cause Bitcoin’s price to rise rapidly in a single day.

When CoinDesk originally documented the state of shorts on Bitfinex on 21 August, Bitcoin’s price was USD 6,435. As of this writing on 22 August Bitcoin’s price has risen to USD 6,700, after going from less than USD 6,500 to USD 6,900 all at once late on 21 August. This price movement could indeed be the result of a short squeeze on Bitfinex.

This rally could continue since Bitcoin is oversold according to the relative strength index (RSI), so this bump in prices from the possible short squeeze could lead to a bigger rally towards Bitcoin’s equilibrium price.


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Law Firm Verifies Tether Backed By USD Bank Reserves

Tether has been under intense scrutiny recently after a study alleged that Tether was responsible for manipulating Bitcoin’s price during the rally to USD 20,000, and that Tether was possibly adding new coins into circulation with the purpose of pumping up Bitcoin’s price without backing them with USD, which would effectively be money printing. The Commodities Futures Trading Commission subpoenaed both Tether and Bitfinex who have the same CEO, Jan Judovicus van der Velde, possibly in relation to this matter.

Tether Limited retained the law firm Freeh, Sporkin & Sullivan (FSS) to verify that Tether really had USD in the bank to back all of its coins, and FSS found that Tether has USD 2.545 billion in banks that it controls, more than enough to cover the 2.538 billion Tethers in circulation during the verification on 1 June 2018.

While this is not an official audit since it was not done by an accounting firm, FSS is a reputable law firm that was founded by three former federal judges including former FBI Director Louis Freeh, and has decades of experience working with the United States government to ensure compliance and business integrity. FSS received permission to review Tether’s bank balances at any time it chose, and queried the banks on a random date so that Tether would not be able to put money in the bank just to pass the verification. That being said, this verification is only relevant for 1 June 2018, and is no indication of how much money Tether had in the bank before or after that date.

Tether’s General Counsel, Stu Hoegner, says it are not able to obtain an audit due to the nature of the cryptocurrency industry. Cryptocurrency is uncharted territory for auditors, there is uncertainty about how standard auditing rules apply to cryptocurrency and auditors don’t tend to make their own decisions on how the rules apply. Indeed, Tether used to have an auditing firm, Friedman LLP, but the business relationship fell apart. The last report from Friedman LLP in September 2017 indicated that Tether had USD 442.9 million in bank reserves, enough to back all of its coins at the time.

Tether is in discussions with accounting firms to conduct a full audit, but for the time being, the verification done by FSS was the most timely option to prove that Tether wasn’t committing fraud, in order to quiet down the media storm that started with the Bitcoin price manipulation study.

It is good news for the cryptocurrency markets that Tether is truly backed by USD bank reserves as promised since it is the 11th largest cryptocurrency by market cap, and is an essential mechanism for quickly transferring money between cryptocurrency and USD, with billions of USD of trading volume per day. Since the allegations against Tether helped drive cryptocurrency prices downwards, perhaps the market will be driven upwards now that these allegations have been found to be untrue.


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Crypto Community Critiques Bitcoin-Tether Manipulation Study

A study published earlier this week by economics professor John M Griffin concluding that the value of Bitcoin has been manipulated via Tether (USDT) has been rejected by portions of the cryptocurrency community, with the criticism that it had clearly not been peer-reviewed.

Findings of the study

Griffin claims in his research that Bitcoin has been routinely manipulated by supposedly USD-backed cryptocurrency USDT, while also implicating prominent trading platform Bitfinex. Much of the Bitfiniex management team overlaps with that of Tether, and the exchange site is the main conduit for USDT. In a statement given to Bloomberg, Bitfinex CEO JL van der Velde rejected any accusation of the company’s involvement.

A more detailed look into the findings of the original study was covered by Bitcoin News yesterday.

”Coordinated FUD”

Much of the backlash from the community online rejects it as a coordinated FUD attack, dismissing the analysis as ungrounded pessimism. Twitter user Whalepool, maintaining some 36,700 followers and describing itself as a “community of daytraders focused mainly on Bitcoin and other cryptocurrencies”, condemned the study as “a coordinated FUD attack against all of crypto”.

As reported by Finance Magnets, a Reddit user using the pseudonym Priest_of_Satoshi critiqued the study by noting that all it really proves is “people minting Tether are exceedingly good at ‘buying the dip’ and they probably bought about 50% of the dips”. Just like the stock exchange, those trading cryptocurrencies for maximum profits are required to note trends in order to buy and sell appropriately.

Another Twitter user pointed to Griffin’s work at a consulting firm specializing in fraud cases, as well as the fact that the SSRN library where the paper was posted does not require any form of peer-review before publication.

Tether’s actions ”exactly what should happen”

Matt Odell, who is described in his Twitter profile as working in “Bitcoin & distributed systems” with around 13,700 followers, said that the study neither proves price manipulation, nor lack of reserves. The falling price of Bitcoin sees people sell their holdings for USDT, initiating a USDT price rise which prompts Tether to issue more tokens so it again correlates with the price of one USD.

Odell describes Tether’s supply increase during market decline as “exactly what should happen”. He did note in November 2017, however, that the relationship between Bitfinex and Tether had “always been sketchy”, calling Tether “a centralized stop-gap solution until connections to fiat are unnecessary”.

I’ve said this countless times before, the fact that Tether supply increased during market declines doesn’t prove manipulation. That’s exactly what should happen if Tether is working as designed.

— Matt Odell (@matt_odell) June 13, 2018

Tether reserves

While Tether may be holding reserve supplies of its tokens in the same way responsible banks are required to, it cannot reveal where its money is held else it would face potential business closure. As some call for Tether to be more transparent in their processes, it is unable to categorically prove such reserves do or do not exist.


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Swiss Crypto Haven Zug to Pilot Blockchain Voting

Switzerland’s progressive blockchain center in Zug is going to conduct the first blockchain-based test vote later this month, reports Coinspeaker.

In 2016, Zug was the first city in the world to accept Bitcoin (BTC) as payment for certain municipality services, and also established ‘Crypto Valley’, a not-for-profit association supporting the development of blockchain and cryptography-related technologies and businesses.

One reason for Switzerland’s success as a center for blockchain and fintech, according to Swiss law firm MME, is the country’s openness to new business concepts and innovation. Marin Eckert MME partner said, “Swiss regulators are among the few that really have a deep understanding of the technology and how it works.”

Bitfinex, the fifth-largest cryptocurrency exchange by 24-hour trading volume, planned to leave its current base in Hong Kong and relocate its resources to Switzerland in March of this year.

The trial blockchain-powered vote will utilize Zug’s eID system voting on minor issues and the future of the ID system itself. Some of the municipal services that the public will be asked to vote on include annual fireworks displays, digital ID library lending, digital entry ID parking fees and electronic tax returns.

Owners must be in possession of a digital ID in order to place their yes/no votes which will be held on 25 June. The eID system was established in November 2017, but at this stage only includes 200 users who registered in a pilot for payment of municipal services last year.  Registered voters can get their voices heard by downloading the uPort app to smartphones and then submitting their vote electronically.

Zug is not alone in Switzerland in term of its blockchain- and cryptocurrency-friendly projects, and utility payment facilities, as it has a rival in the southern Swiss-Italian border town of Chiasso, which announced earlier this year that it planned to take Bitcoin to settle up to CHF 250 (Swiss francs equivalent to USD 265) of tax bills starting from January 2018.


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Bitfinex DDoS Attack Shuts Out Users

The Bitfinex cryptocurrency exchange has been experiencing a Distributed Denial of Service (DDoS) attack since the morning of 5 June 2018, according to an announcement on its Twitter account. The attack started this morning during unplanned maintenance due to problems with its trading engine, and is causing extreme load and poor performance on its servers.

Bitfinex is under DDoS attack. The DDoS attack started during earlier maintenance and has been ongoing since.

— Bitfinex (@bitfinex) November 26, 2017

It’s unknown if the problems with Bitfinex’s trading engine and the DDoS attack are related. The exchange was offline during the maintenance when the attack started. It is possible that the party or parties behind the DDoS attack wanted to hit Bitfinex at a time of weakness.

In a DDoS attack, hackers flood a victim with data from many different IP addresses, making the attack impossible to stop by blocking any single source. The goal is to make a website inaccessible by customers. The physical equivalent of a DDoS is blockading the front of a store with a group of people so customers can’t get in. While bad for business, the security of the cryptocurrency that Bitfinex holds does not appear to be compromised by a DDoS attack.

Bloomberg reports that the attack is preventing users from accessing the exchange. Bitfinex is the largest exchange in the world by trading volume between USD and Bitcoin, with trading volume on an average day of BTC 20,000 (some USD 150 million). Trading volume has floored today due to the exchange being offline during maintenance and the following DDoS attack.

Events like these can cause uncertainty and fear in Bitcoin markets but so far its price has barely reacted and is holding steady above USD 7,400.


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Crypto Exchange Bitfinex Demands User Tax Information

Prominent cryptocurrency exchange platform Bitfinex has given users until 24 May to confirm their tax status in order to continue using the platform’s services.

BVI legal requirements

According to a message account holders found when they logged into their Bitfinex accounts, as a company operating in the British Virgin Island (BVI), local laws now require that the tax information is collected. The details collected then may potentially be shared with the government of the users home country, should BVI law require it.

The message reads: “Pursuant to BVI law, we are required to obtain self-certifications from our customers in order to ascertain each customer’s tax residence… [we]may then exchange that information with the tax authorities of the customer’s country of residence, consistent with British Virgin Islands law, the U.S. Foreign Account Tax Compliance Act (FATCA), and the Organisation for Economic Co-operation and Development Common Reporting Standard (CRS).”

Centralization of exchanges

While it is crucial to provide legal regulations and safety for those trading cryptocurrencies, many have interpreted this as a step too far, particularly for those advocating the decentralized nature of blockchain trading. Similar criticism fell on peer-2-peer platform Localbitcoins, that announced earlier this month identification documents would be necessary if partaking in significant trading activity.

Unsurprisingly, backlash immediately ensued from the cryptocurrency community, with users taking to Twitter to rally Bitfinex account holders to withdraw their funds. One such user includes crypto personality Whale Panda, who wrote: “Bitfinex is now requiring users to give their tax information so that it can send it to BVI which will exchange it with your country’s tax authorities. We strongly disavow.”

Bitfinex is now requiring users to give their tax information so that it can send it to BVI which will exchange it with your country’s tax authorities.

We strongly disavow.

If you also disagree with this decision, peacefully protest it by withdrawing your money from Bitfinex

— Whalepool (@whalepool) May 17, 2018

Bitcoinist have reported that Bitfinex responded to the criticism by admitted that they were “deliberately targeting” specific users account details, although it is unclear the specifications with which those targeted are being held to.


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