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Bitfinex: Bitcoin [BTC] premium on exchange diminishing; possible sign of risk settlement?




Bitfinex: Bitcoin [BTC] premium on exchange diminishing; possible sign of risk settlement?
Source: Pixabay

The controversy-riddled cryptocurrency exchange Bitfinex is veering towards ceding its effect on the price of Bitcoin [BTC] relative to other top exchanges. At press time, the difference between the price of the top cryptocurrency on Bitfinex and other exchanges was less than 2 percent.

Bitcoin price on Bitfinex dropped to 1.2 percent in comparison to other exchanges, and the premium of the iFinex-operated top stablecoin Tether [USDT] is 0.4 percent, as attested by Larry Cermak, an analyst at TheBlock. Cermak added that this is an indication of “less risk” percolating in Bitfinex. He tweeted:

“Bitfinex premium decreased drastically in the last 24 hours signaling that traders think there is way less risk now.
Tether premium: 0.4%
Bitfinex premium: 1.2%”

Source: Trading View

As can be seen from the BTC price on Coinbase, Bitstamp, Bittrex, Gemini as opposed to Bitfinex, the price listed on the first four exchanges is around $6,840, with a deviation as low as $3, while Bitcoin is traded on Bitfinex at $6,809, a reverse movement, but still closing the gap between its contemporaries.

Following the release of a report by the New York Attorney General citing the cover-up of undisclosed losses amounting to $850 million, the price of Bitcoin was inflated on the exchange, resulting in several arbitrage opportunities for traders. The report added that Bitfinex used its Tether [USDT] reserves to hide the losses, leading to the stablecoin’s premium also rising.

Days after the NYAG report surfaced, the disparity in BTC price on Bitfinex compared to other exchanges was as high as $350. On April 30, the BTC price on Bitfinex was just under $5,500 while exchanges like Bitstamp, Bittrex, Coinbase, and Gemini recorded the price at under $5,150, exhibited a price deviation of less than $2 between the exchange.

Furthermore, on May 3, Bitcoin breached $6,000 on Bitfinex, whereas on other exchanges this significant milestone was passed almost a week later. It should be noted that on May 3, Bitcoin rallied from $5,500 to $5,800, failing to breach $6,000 on other exchanges, but pointing to a decreasing spread between other exchanges and Bitfinex.

Since the debacle surfaced, the exchange hit back at the NYAG questioning the body’s jurisdiction, legal standards and authority over the matter, but, more importantly, to remedy to the fiasco, Bitfinex launched their own native tokens, LEO. The first positive sign for the exchange in weeks was that the tokens were “oversubscribed”, according to Fundstrat’s Tom Lee, indicating a decline in the spread and a return of investor confidence.

In light of this Bitfinex return, Mati Greenspan, a senior market analyst at eToro, stated on May 9:

“Bitfinex premium is finally eroding. Now just $75 higher than the rest of the market.”

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JP Morgan: Big banks stand corrected as Bitcoin rally past intrinsic value; admits current surge mirrors 2017 rise




JP Morgan: Big bank stands corrected at Bitcoin rally past intrinsic value; admits current surge mirrors 2017 rise
Source: Pixabay

Big banks are riding a FOMO wave as the Bitcoin bull-run is just beginning. Spearheaded by the changing colors of JP Morgan, which recently forayed into the digital assets world, the banking elite is now suggesting that their initial stance on Bitcoin and the larger cryptocurrency world might have been off.

A recent chart by JP Morgan shows the current BTC price veer upwards chiding the “intrinsic value” the big bank placed on the virtual currency.

Based on the article by Bloomberg, the price of the coin would reverse towards the end of December 2018 and then make marginal gains until May 2019, all under the $5,000 mark. In reality, the BTC price, after dropping to “rock bottom” at just above $3,100 in early December 2018, edged upwards.

Several spurts of growth were seen in early January and February, prior to a massive April ascendance. On April 2, Bitcoin did away with the bank’s value mode and amassed a daily gain of over 15 percent, fuelling its current rise. Breaking the $5,000 ceiling in the process, which was pegged to remain intact well into May 2019, the king coin is now almost $3,000 ahead of the mark and is not looking to stop.

Source: Bloomberg

It should be noted that JP Morgan’s “intrinsic value” is calculated on the basis of the marginal cost of production, electricity prices, and hash rates. This model does not take into account, at least on absolute terms, the anticipatory effect of the 2020 halving, which, according to a slew of analysts is the behind the price rise.

Nikolaos Panigirtzoglou, the MD in the Global Market Strategy team at JP Morgan stated that Bitcoin breaking through its “intrinsic value” showed signs of mirroring its 2017 bull run. He evidenced this move by comparing the pre-December 2017 slump to the one seen prior to the current bullish swing.

The analyst added:

“Over the past few days, the actual price has moved sharply over marginal cost. This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”

With the analyst admitting that the imparting of an “intrinsic or fair value” to a cryptocurrency, much less a volatile one like Bitcoin, is a “challenging” ordeal, a mere JP Morgan acknowledgement of a Bitcoin bull-run is a remarkable sign for the digital assets industry, especially given the bank’s and its CEO Jamie Dimon’s Bitcoin-bashing in the past.

Mati Greenspan, senior market analyst at eToro attested to the same, adding a key point that JP Morgan failed to take into account in their calculation. He stated:

“Great to see JPM finally admitting that Bitcoin has intrinsic value.
Now wait till they understand that miners who run a surplus tend to begin hording.”

Despite Bitcoin slumping at press time, recording a 1.23 percent decline against the dollar, the prospects look positive. After recording a massive gain on 19 May, briefly surging past $8,000 for the second time in a week, Bitcoin created a High-Low [HL] at $7,100, which many analysts look at with glee.

This HL immediately following last week’s pull-back caused due to post-Consensus bears, a Bitstamp sell-order and market correction showed the king coin’s bullish persistence and can even be a foundation for a $9,000 ascendance, defying any “intrinsic value” expectations.

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