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Billionaire Bitfinex Shareholder Hints New Token after $850M Tether Scandal

Billionaire Bitfinex Shareholder Hints New Token after $850M Tether Scandal

Billionaire Bitfinex Shareholder Hints at Exchange Token after $850 Million Tether ScandalBitfinex is planning the possible issuance of an exchange token. | Source: ShutterstockBy CCN.com: According to a statement released by Dong Zhao on Weibo, a billionaire investor in Bitfinex and a widely recognized trader, bitcoin exchange Bitfinex is planning to create an exchange-based token following the Tether scandal.Some local sources have said that investors in Asia have shown interest in the exchange token proposal made by Zhao, with one miner based in China suggesting that investors have already pledged $300 million in Tether.According to @zhaodong1982 there’s a high possibility that @bitfinex is going to do an IEO, and some big whales already reserved $300m of the allocations in #USDT pic.twitter.com/oXfbrGk2Cg— Zirui 🧜🏻‍♀️ (@zirui_z) April 29, 2019While the $300 million figure is unconfirmed and it remains uncertain whether Bitfinex is currently garnering investors, the crypto market, especially the Asian market, was generally said to have been unphased by the Tether controversy.“The market just doesn’t care. This community has an immense tolerance for pain,” one crypto trader asking for anonymity due to the sensitivity of the subject told the WSJ.Why Bitfinex Token 2.0?In 2016, after suffering a high-profile security breach that led to the loss of user funds, Bitfinex released BFX tokens. The tokens represented shares in iFinex Inc., the parent company of Bitfinex and Tether Inc.In April 2017, Bitfinex said in a statement that it redeemed 100 percent of outstanding BFX tokens, compensating all users who were affected by the hack.“Bitfinex is pleased to announce that we will shortly be redeeming 100% of all currently issued and outstanding BFX tokens. This will be the final redemption of BFX tokens created in August 2016. After these redemptions, no BFX tokens will remain outstanding; they will all be destroyed,” Bitfinex said at the time.Bitfinex gave 60,000 shares as security to Tether in return for a $900million loan facilityThis implies a minimum valuation of $15/shareCreditors from the 2016 hack were given the chance to convert at $1/share— Alistair Milne (@alistairmilne) April 30, 2019In essence, Bitfinex is planning to secure funding for the capital it allegedly lost amidst its dealings with Crypto Capital Corp, a Panama-based “bank” with the same method it raised funding in 2016 to deal with its $72 million hacking attack in 2016.What the Token is ForOn April 25, the office of the New York Attorney General Letitia James filed a lawsuit against iFinex for allegedly co-mingling client funds and mismanaging the cash reserves of Tether, a stablecoin that represents the value of the U.S. dollar.The Attorney General alleged Bitfinex of losing $850 million it sent to Crypto Capital Corp to process funds on behalf of the company, which the firm failed to recoup. Bitfinex is said to have granted itself access to $900 million of Tether’s reserves, a move the Attorney General described as a cover-up.“In order to fill the gap, executives of Bitfinex and Tether engaged in a series of conflicted corporate transactions whereby Bitfinex gave itself access to up to $900 million of Tether’s cash reserves, which Tether for years repeatedly told investors fully backed the tether virtual currency ‘1-to-1,’” the official document released by the Attorney General’s office read.If successful, the token would allow Bitfinex to secure $900 million from investors willing to take equity in iFinex in exchange for USDT, which then would allow iFinex to refill the $900 million it allegedly received from Tether Inc.Zhao said speaking to CoinDesk:Exchange tokens have better liquidity. They are the only real token that is not a shitcoin. The issuance method could be similar to that of other exchange tokens, which were distributed through pre-paid trading fee packages.Could Zhao be Buying Time For Bitfinex?CnLedger, a respected news source for the Chinese crypto industry, told CCN that Zhao has a “considerable” reputation in China and as such it is highly unlikely for Zhao to release false information about the Bitfinex token offering.CnLedger told CCN:“Zhaodong was an early bitcoin adopter in China, with a considerable reputation. Therefore it is unlikely for him to publish fake news about Bitfinex. In the mean time, he claims to be a shareholder of the exchange, so saying things that will help defend the interest of Bitfinex is expected.” About The AuthorJoseph YoungHong Kong-Based Finance and Cryptocurrency Analyst. Contributing regularly to CCN and Hacked. Providing unique insights into the crypto and fintech space since 2012.
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Traders are piling into bitcoin as a haven against volatile markets. This researcher warns they could get burned.

Dan Kitwood/Getty Images Bitcoin isn’t a ‘unique’ hedge as it’s vulnerable to the same market risks as conventional investments, according to a new study. It becomes more exposed to factors such as inflation expectations when its price is less volatile, the researcher found. The findings are a “cautionary note” for investors, writes author Dimitrios Koutmos,…

Traders are piling into bitcoin as a haven against volatile markets. This researcher warns they could get burned.

hedge mazeDan Kitwood/Getty Images

  • Bitcoin isn’t a ‘unique’ hedge as it’s vulnerable to the same market risks as conventional investments, according to a new study.
  • It becomes more exposed to factors such as inflation expectations when its price is less volatile, the researcher found.
  • The findings are a “cautionary note” for investors, writes author Dimitrios Koutmos, as they suggest bitcoin isn’t “a unique asset class whose price behavior is detached from economic fundamentals.”
  • Watch bitcoin trade live.

An escalating US-China trade war, the slowing Chinese economy, and a prolonged Brexit process have fueled anxiety in financial markets, boosting investors’ interest in bitcoin as a hedge against volatility.

However, new research suggests the cryptocurrency may have limited value as a hedge as it’s vulnerable to the same factors that move the prices of stocks and other mainstream investments. While it escapes some of those drivers when its price is especially volatile, the increased risk may outweigh the greater returns.

“Bitcoin prices, despite their seemingly attractive independent behavior relative to economic variables, may still be exposed to the same types of market risks which afflict the performance of conventional financial assets,” wrote Dimitrios Koutmos, an assistant professor of finance and technology at Worcester Polytechnic Institute in Massachusetts, in a study titled “Market risk and bitcoin returns” published online in the Annals of Operations Research this month. 

Koutmos used treasury bill rates, the VIX and Deutsche Bank FX volatility indexes, treasury yields, forward inflation swap rates, equity indexes, and the difference between corporate bond yields and treasury yields as proxies for short-term interest rates, market-volatility expectations, and other factors that affect traditional financial assets. He examined their influence on daily bitcoin prices between January 2013 and September 2017.

His key finding was that several of these factors were “important determinants of bitcoin returns.” Specifically, short-term interest rates and investors’ expectations of stock-market and foreign-exchange volatility were significant determinants of the price of bitcoin during periods when it rose or fell sharply. Those three factors, along with general economic conditions and inflation expectations, influenced the price of bitcoin when the cryptocurrency was less volatile, according to the study.

The findings serve as a “cautionary note” for investors, Koutmos wrote, as they suggest bitcoin isn’t “a unique asset class whose price behavior is detached from economic fundamentals.”

They also indicate “bitcoin’s usefulness as a diversification instrument is time-dependent,” given the cryptocurrency was more susceptible to factors such as inflation expectations during periods when its price was less volatile. 

If bitcoin truly is a better hedge when its price is moving around, investors who bought into bitcoin’s price surge this month as a hedge against the sharp downturn in stocks might be feeling pretty smug. However, Koutmos also found that bitcoin’s superior returns during periods of high volatility weren’t high enough to offset the increased risk, meaning its returns during low-volatility periods were higher on a risk-adjusted basis. 

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‘Bitcoin Will Disappear,’ Craig Wright Rants in Blistering ‘Satoshi’ Manifesto

‘Bitcoin Will Disappear,’ Craig Wright Rants in Blistering ‘Satoshi’ Manifesto

‘Bitcoin Will Disappear,’ Craig Wright Rants in Blistering ‘Satoshi’ ManifestoSelf-proclaimed “Satoshi Nakamoto” Craig Wright published a blistering manifesto that predicted Bitcoin would disappear in “moments.” | Source: Crypto Strategies/YouTube (i), Shutterstock (ii). Image Edited by CCN.By CCN: Australian entrepreneur Craig Wright published a blistering manifesto that argues bitcoin (BTC) will eventually disappear because it’s being used to facilitate criminal activity. And that perverts his original vision for the cryptocurrency.For reference, Wright has repeatedly claimed that he is Satoshi Nakamoto, the mysterious creator of bitcoin. He has yet to offer definitive proof.Civil War Erupts Between Warring Crypto FactionsWright is a proponent of Bitcoin SV (Satoshi’s Vision), which he insists is the “true bitcoin.”Wright and his ally Calvin Ayre claim BSV will supplant all other fake pretenders to the bitcoin throne and will crush rivals BTC and Bitcoin Cash (BCH) into the ground.Bitcoin Price Will Crash to Zero Says Bitcoin Cash Founder Calvin Ayre https://t.co/34ZrOZVJhu— CCN.com (@CCNMarkets) December 17, 2018‘Bitcoin Needs to Act Within the Rules’In a withering manifesto, Wright claims he created bitcoin to operate within the law and not to facilitate criminal activity like money-laundering.Wright then torched cryptocurrency evangelists who claim BTC is totally decentralized and therefore doesn’t need to play by any rules. However, Wright says they’re deluding themselves and need to be slapped awake.“I designed Bitcoin to be a system that worked within the rules.”“Bitcoin needs to act within the rules. If it does not, then the exchanges and systems that allow people to use Bitcoin act to stop it being widely used and disseminated and criminalise all of those in the system.”“If Bitcoin or any other monetary system seeks to act outside the rules, it becomes an outlaw system, and once it does, it is easy to stop.”“The majority of people want rules. They don’t want to fight in a world of uncertainty, and want to know that the contract that they have conducted will remain valid not just now, but throughout the term of the exchange — for which we need rules.”Craig Wright, the self-proclaimed inventor of bitcoin, says BSV will supplant BTC in due time.Craig Wright: Binance Facilitates CrimeMoreover, Wright insists that cryptocurrency exchanges are basically criminal enterprises that “facilitate money laundering.” Accordingly, he predicts that they will eventually go out of business “because crime will always fail.”Specifically, Wright accused Binance and Bitfinex of lying to their customers when they claim to be decentralized. He says they’re not. Wright also explained that the only reason why anyone wants a decentralized financial platform is so they can use it to hide or launder money.“Groups such as Binance who seek to facilitate money laundering and crime will always fail. They defraud you in telling you that they are decentralised and cannot be controlled.“Bitcoin is a system that was set in stone. If the protocol is changed, then it shows and demonstrates it is not Bitcoin. When those involved altered the rules, they impacted their entire ecosystem — it is a centralised power structure. They defraud you when they lie about decentralisation and tell you that they have no ability to change things but then alter the rules.”“When those in power are able to change the protocol, they can change the lives and the finances of those involved in the system at an arbitrary whim. It is why BTC is not Bitcoin.”Wright: Bitcoin ‘Will Disappear In Moments’Wright further claimed that because bitcoin has been manipulated, it will eventually disappear. And when that happens, he warned that it’ll vanish instantly.“Where a blockchain does not follow the rules…it is simple for government to stop. When the action happens, as it did with e-gold, everything invested in the system will vanish in a flash. When BTC disappears, it will not disappear slowly, it will disappear in moments.”Wright then concluded by promising that he’ll sign a Satoshi transaction after “I have definitively proven I created Bitcoin. Not before.” About The AuthorSamantha ChangSamantha Chang is a financial editor who writes about politics at BizPac Review, about business at CCN, and general news at HVY. She is a law school graduate and an alum of the University of Pennsylvania who enjoys finance, flowers, and fitness. You can find her on Twitter at Samantha_Chang.This article was edited by Josiah Wilmoth.
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