Bitcoin's price tumbles as Bitfinex and Tether head to court

The Commodity Futures Trading Commission of the United States (CTFC) summoned representatives of Bitfinex and Tether. As it turned out, the companies had received the notice on December 6th, 2017. Tether...

The Commodity Futures Trading Commission of the United States (CTFC) summoned representatives of Bitfinex and Tether. As it turned out, the companies had received the notice on December 6th, 2017.

Tether (USDT) issues a cryptocurrency equivalent of the USD. The company maintains a stable price of its token at about $1 due to centralized issuance, and many exchanges calculate the rates of other currencies against USDT, without using so-called fiat money.

Tether issued additional USDT as demand increased. At the end of January 2018, the number of tokens issued exceeded 2.2 billion.

Bitfinex is one of the most popular cryptoexchanges. Due to a sharp increase in the number of users the exchange temporarily closed registration. They later resumed registration for accounts with a deposit of $10,000.

Recently it became known that Bitfinex and Tether are controlled by the same people, and some began to suspect the exchange was involved in fraudulently manipulating the price of Bitcoin. In addition, users have repeatedly accused that Tether's assets are not backed up with dollars. The company began an internal audit in partnership with the auditor Friedman LLP to confirm the availability of funds needed to secure the USDT, but eventually refused to cooperate, citing an unreasonably lengthy verification procedure.

In 2017, hackers managed to steal $30 million in USDT tokens which also caused additional reputational damage of Tether. After the theft, the company announced the transition to a new platform and released additional tokens.

In response to the alarming news, the cryptomarket sank once again. The price of Bitcoin dropped below $10,000 in the last days of January and then continued its decline to $8,000. Most likely this effect is a self-fulfilling prophecy. The creator of Litecoin, Charlie Lee, says that USDT is an altcoin just the same as the rest, and its price should not affect Bitcoin and other altcoins. But people are afraid that there is still influence and they began to massively sell the cryptocurrency. This is the reason for the fall of the market.

If the court proves that Bitfinex manipulated the rate of Bitcoin with the help of USDT, for example overvalued it, the market would be seen as much stronger than it really was. This is bad news for traders, but good for cryptoadvocates: the centralized impact on Bitcoin will decrease and the system will become more stable.

At the same time, exchanges will use fiat dollars again. For example, the Bittrex exchange has already abandoned USDT.

Follow the Tether and Bitcoin online exchange rate: