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More than 100 million USDT (US dollar-backed Tether cryptocurrency) was removed from circulation within 24 hours from the Bitfinex wallet and then sent to unidentified addresses around the world. This highly unusual activity of Tether has sent ripples across the crypto community.
Bitfinex is the third largest holder of USDT with over 259 million in its wallet. The Tether exit is most significant in the light of two separate controversies which have emerged recently. One is regarding the insolvency of Bitfinex, and the other is about the dollar backing of USDT being questioned due to several reasons.
Although in a recent blog post, Bitfinex has denied all claims of insolvency based on reports about their breakup with Puerto Rico based Noble Bank, the doubts about its insolvency remain. These doubts are further nudged with this report of the exit of a such a large sum of USDT from the Bitfinex wallet.
On the other hand, Tether has been accused of not having enough US dollar reserves. A paper published by two professors from the Department of Finance at the University of Texas has suggested that Tether was instrumental in causing the 2017 price rise of Bitcoin.
These two isolated controversies are, however, related by the fact that both Tether and Bitfinex have shared management and were even served a subpoena. Nevertheless, the other significant concern in this regard is the fact that the high selling of USDT has caused a price slippage to about $0.95. The change in the price of USDT can, therefore, affect the market to a significant degree.
This erosion of trust may have been a cause of the unusual movement of Tether between the exchanges that have put traders and investors on alert. Also, it is only by judging the liquidity pattern of the Bitfinex exchanges that the design of the whole cryptocurrencies market can be properly judged.