Bitcoin Traded at a Record $1,450 at Bitfinex, but is Any of it Real?

Journalist:
Andrew Quentson @Aquentson
April 28, 2017

Bitcoin has gone up from around $890 to a high of $1,449.70 at Bitfinex in just one month, continuing a two years long bullish run after a bottom of $162 was reached during summer 2015.

Its market cap now stands above $21 billion, an all-time high, but its market-share has fallen to around 63%, an all-time low. During those two bullish years, bitcoin’s community has been consumed by a “debate” on scalability which continues to today with much of it turning to in-fighting.

It has further faced draconian measures by PBoC which has ordered Chinese bitcoin exchanges to halt bitcoin deposits and withdrawals. When the exchanges announced the new measures, they said the withdrawals and deposits were halted voluntarily and temporarily.

We now know the former is not true. Since it is PBoC which has given such orders, we cannot be sure the latter is true either until they do actually start processing bitcoin deposits and withdrawals.

During this period bitcoin was also slapped by the SEC which announced the rejection of a much anticipated bitcoin ETF at, literally, the very last minute. Usually, they allow the proposer to withdraw the application if they intend to reject, but it’s not clear whether that was the case considering that it would have offered an easy opportunity for insider trading.

The currency is also facing a challenge from ethereum which has attracted a number of bitcoin businesses as bitcoin’s fees have considerably increased with transactions often delayed for hours or days.

Moreover, if a halt of bitcoin withdrawals and deposits was not sufficient in China, American banks intervened to cut off Bitfinex from the banking system, forcing one of bitcoin’s biggest exchange to halt fiat deposits and withdrawals.

Despite all this, the currency continues to rise, up and up. There are a number of reasons, with monetary mismanagement last year being one factor and awareness being probably another main reason.

Blockchain went mainstream last year, at least at a corporate level. That means bitcoin probably has too. That’s because most articles, from newspapers to corporate brochures, mention bitcoin when introducing the blockchain.

Initially, it was all about “blockchain, but not bitcoin,” which probably led some to wonder what is bitcoin. Now, they usually say “blockchain, which was introduced by bitcoin” or is used by bitcoin, etc. That means bitcoin is probably a household brand now. Most Americans have probably heard of it, at least by name.

That means it is probably the gateway to digital currencies, although eth is beginning to gain awareness in its own right. As such, it continues to attract new users and wider adoption, increasing its utility and thus its price.

That might be a good and probable explanation until Bitfinex halted fiat deposits and withdrawals. Since then, the drying up of such liquidity should have had a downwards pressure, but instead it has sent the price up, increasing by around $50 just on the day it was announced.

That’s probably because those who hold assets at Bitfinex are forced to purchase bitcoins or other digital currencies, thus increasing demand and price due to constraints. This then dragged up other exchanges, perhaps because some arbitrage method has been found or maybe because of the psychological effects it may have.

Bitcoin still trades at around a $100 premium at Bitfinex, while the Chinese exchanges are at a $200 discount. Interestingly, there wasn’t a notable downward pressure by Chinese exchanges, perhaps because since you can’t move bitcoins no one has found an arbitrage method.

Still, the liquidity situation for bitcoin is at its worst since 2014, but, at least for now, the market, as judged by the price, does not seem to care. Whether that will continue and how it will develop, only time can say.

Disclaimer: The views expressed in the article are those of the author and do not represent those of, nor should they be attributed to CCN.

Featured image from Shutterstock.

Last modified (UTC): April 28, 2017 19:36

Andrew Quentson @Aquentson

Feel free to contact me at andrewquentson@gmail.com with any information you may have.