While bitcoin (BTC) continues to rally and hit multi-month highs, Bloomberg’s report also makes the claim that its strong price performance may in part be inflated by recent capital flight from investors unsettled by the spate of controversies affecting crypto exchange Bitfinex and affiliated USD stablecoin issuer Tether.
As reported, the New York Attorney General’s office (NY OAG) has recently accused Bitfinex of having lost $850 million in user deposits, and secretly covering up the shortfall using funds from Tether — the latter of which has itself come under renewed criticism for being backed only 74% by USD reserves. Both companies have rebuffed the allegations and have contested the NY OAG’s injunction order.
Bloomberg further cites TokenAnalyst’s data, which reportedly reveals that Bitfinex has had net outflows of over $1.7 billion in bitcoin and ether (ETH) since April 26 — the date of the NY OAG’s court filings. It also claims that bitcoin traded at a premium of as high as 6% in the controversy’s fallout — even as other coins saw losses given tether’s (USDT) prevalence as an intermediary asset throughout markets.
John Griffin — a finance professor at the University of Texas at Austin — told Bloomberg that “since Tether is insufficiently backed, it means that some of the reserves backing customer assets on exchanges are likely insufficient.” He thus noted that: