Tether’s Issues are Driving a Premium for Bitcoin on Bitfinex

This past week, the price of Tether (USDT), a “stablecoin” which is supposed to be tied to the value of the US dollar with a 1:1 ratio, has fallen approximately 2%. Stablecoins, as their name suggests, are designed to be used as a pairing against other cryptocurrencies, essentially allowing traders to sell their cryptocurrencies for a stable trading cryptocurrency that does not fluctuate in value as much as others. Stablecoins, while useful for minimizing volatility, often take volume away from bitcoin pairings, which by volume, continue to dominate the cryptocurrency trading market.

According to media outlets, Bitfinex, a major cryptocurrency exchange which is incorporated in the British Virgin Islands, now requires all traders to buy or sell major cryptocurrencies such as bitcoin and ether with USDT. The exchange’s action came into effect following rumours that there has been a suspension of fiat deposits into the Bitfinex’s HSBC banking account in which they were seeking to use. Noble Bank, Bitfinex’s previous banking provider which is based in Puerto Rico, has recently come under financial scrutiny as it is looking for a buyer. Due to Noble Bank’s dwindling financial stability, and the unclear relationship between Bitfinex and HSBC, investors may be speculating that Tether users can no longer redeem their USDT for its base price of $1 USD. This uncertainty has driven an approximate 2% premium for bitcoin on Bitfinex’s exchange when compared to other major cryptocurrency exchanges.

According to Tanvir Sodhi, the Vice President of Operations at 3iQ Corp, “It seems like they moved USDT funds out of Noble Bank. Changing banks may have caused funds to be frozen until HSBC does its due diligence, and with Bitfinex’s user base and the natural high risk of cryptos, this could take quite some time”. The premium for bitcoin on Bitfinex may continue to increase as rumours gather about the exchange’s fiat operations. “$2.6 billion USD of Tether selling into bitcoin could push it up a lot”, said Shaun Cumby, the CIO of 3iQ Corp.

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Fred Pye

Frederick T. Pye

CHAIRMAN, CHIEF EXECUTIVE OFFICER & DIRECTOR

Frederick T. Pye is the Chairman, Chief Executive Officer and Director of 3iQ Corp. He is also the Chairman and Director of 3iQ Digital Holdings Inc. Mr. Pye is recognized for creating and promoting creative and unique investment products for the investment industry.

Mr. Pye has managed private client portfolios with Landry Investment Management and various other investment dealers. Prior to this Mr. Pye was Founder, President & Chief Executive Officer of Argentum Management and Research Corporation, a company dedicated to managing and distributing quantitative investment portfolios including the first long-short mutual fund in Canada.

He was also Senior Vice-President and National Sales Manager of Fidelity Investments Canada and an integral part of the team that saw assets rise from $80 million to over $7.5 billion in assets under management during his tenure. He also held various positions with Guardian Trust Company, which listed the first Gold, Silver and Platinum Certificates on the Montreal Exchange.

Mr. Pye obtained a Masters in Business Administration from Concordia University.