The crypto world never ceases to amaze and in a sudden plot twist, iFinex, the parent company of stablecoin issuer Tether and cryptocurrency exchange Bitfinex, has “won” an appeal against the New York State Attorney General (NYAG). The appellate division of the state’s Supreme Court granted iFinex’s request to stay a previous court order requiring the company to turn over documents to the Attorney General’s office. This announcement, which has been celebrated as a win by the group, should be taken with a grain of salt because iFinex has until November 4 to “perfect its appeal” according to a court document, or else the company may be required to continue to comply with the investigation. If the case is allowed to proceed actual arguments won’t likely begin until 2020.
As a reminder, the parent company of the Hong Kong-based cryptocurrency exchange was sued by the New York Attorney General in April 2019 following allegations that the company was given a line of credit from Tether Holdings Limited, the maker of the Tether cryptocurrency.
The price action was something to write home about, as Bitcoin crashed all the way to the $7.8k area, while Ethereum traded around the $150 level. Conspiracy theorists were busy hypothesizing, is it Bitfinex trying to plug in a capital gap before the hearing, is it related to Craig Wright and his settlement with Dave Kleiman’s estate, or is it linked to the recent collapse in Bitcoin hash rate. Another potential scenario is reallocation from Bitcoin to Ethereum, especially given the explosive growth in Tether transactions on the Ethereum blockchain, which even prompted miners to raise gas limit to allow for more transactions per block. This is roughly equivalent to increasing the block size for Bitcoin blocks. The implication may be such that even with Ethereum transitioning to Proof of Stake (PoS) from Proof of Work (PoW), some miners will look to cash in on this appetite for Tether and turn up the power.
Looking elsewhere, in day two of trading for Bakkt, the platform saw volumes more than double to 162 Bitcoin from the 71 Bitcoin traded on Monday. As alluded to on the launch day, it is certainly too early to call this a “flop” and as pointed out in the past, some of their largest prospective clients still don’t have permission to trade physically-delivered futures contracts. At the same time, some futures brokers may simply not be ready to clear them. It is also important to remember the broader implications of the launch - the platform enables physical delivery of Bitcoin with end-to-end regulated markets and custody. Also, it is worth noting that 50% of CME bitcoin futures open interest are set to expire this Friday. It is possible that some will transition to Bakkt.
Thank you for reading,
The BeQuant’s Analytics team