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Source: Flickr

Bitcoin price demonstrated an anomalous change on October 15, 2018; where the price drastically surged from $6,376 at 12.31 UTC to $7,083 at 14.50 UTC. A downturn in price was seen approximately one hour after that to $6,821, before went stable at around $6,400 — $6,600. It was one of the one of the most unexpected fluctuations after a while.

Analysts considered the ups and downs as a trend over the past three months. Crypto Monk stated that, “BTC on the weekly doesn’t look like something about to crash to me. If I had to compare it to the 2014 fractal, it would look like the bottoming area[1].”

According to CoinGecko, at the time of writing bitcoin price stays at around $6,500; $100 higher than the day before. Since October 17, 2018, bitcoin price showed a slight movement and remained steady at below $6,700.

Figure 1: Bitcoin Price 15–21 October 2018
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Data Source: CoinGecko

Experts conclude that there are two main reasons that possibly cause the fluctuation.

Bitfinex Temporary Paused Fiat Deposits

Nick from the prominent Youtube channel DataDash said that the main cause might be because of Bitfinex’s shut down to fiat deposits. “Most of the gains have come down after Bitfinex had been shutting down fiat USD tether deposits. A lot of people were concerned that something was going wrong, something had happened to the exchange[2].” Reported from Bitfinex’s official Medium page, the reason to pause fiat deposits was ‘to implement a new and increasingly robust fiat deposit system to be available in the next 24 hours, by Tuesday, October 16, 2018, to allow for the efficient processing of fiat deposits.[3]’

The Fall of Tether

The first ‘stable coin’ tether (USDT) which supposedly pegged 1:1 to the U.S. dollar fell up to 15% at the same time as the price of bitcoin fluctuate wildly. The movement caused a loss of trust among traders, causing them to sell tether and invest in other cryptocurrencies. A massive selloff for tether against bitcoin was seen, resulting in a price rise in bitcoin. Oddly, while in other exchanges like Bittrex and Kraken tether was sold at 85 cents and 90 cents, only in Bitfinex the price hit $1; raising some concerns in social media speculating a price manipulation[4].

Figure 2: Tether (USDT) Price October 15, 2018
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Data Source: Blockfolio App

Analyst and investor Joseph Young expressed his opinion towards the Bitfinex manipulation allegation. He tweeted that, “It’s truly mindboggling to see what Bitfinex has done with Tether and its exchange. Bitfinex could have been one of the most valuable billion dollar companies in crypto. Yet, it threw out the opportunity out the window and shot itself on the foot. Bye @bitfinex RIP.”

Joseph-Young-s-Tweet-3

Another sensational occurrence also happened on the price of bitcoin where in Bitfinex was worth around $7,000, while other exchanges like Coinbase only priced it around $6,500. The big disparity of bitcoin price in Bitfinex and other exchanges was explained by the divergence of tether rate and U.S. dollar.

Figure 3: Bitcoin Price in Bitfinex vs Coinbase
Bitfinex-vs-Coinbase-1
Data Source: Blockfolio App

Tether’s Chief Compliance Officer Leonardo Real released a statement, hours after tether price fell below its peg to $0.92 and later on temporarily bounced back to $1 per token. “Tether is the leading provider of tokenized fiat currencies and is listed on many exchanges worldwide. We would like to reiterate that although markets have shown temporary fluctuations in price, all USDT in circulation are sufficiently backed by U.S. dollars (USD) and that assets have always exceeded liabilities. In June 2018, a report from Freeh Sporkin & Sullivan, LLP (FSS), based on a random date balance inspection and a full review of relevant documentation of bank accounts, confirmed that all Tethers in circulation as of that date were indeed fully backed by USD reserves[5].”

In addition, Coinspeaker reported that based on a Bitfinex insider information, Bitfinex was not connected with either the strange growth of bitcoin or the price drop in tether. However, a third-party connected network of trading bots that were set up for tether sales implicated to bitcoin’s rate manipulation. Bitfinex found a connection and activities between a couple of accounts which possibly caused the tether debacle, which was related to the Rothschild’s IMMO[6].

Sentiment Towards Bitcoin

Although this year bitcoin doesn’t grow as miraculous as 2017, the sentiment over bitcoin is still extremely positive; mainly because the spikes in 2017 were rather unnatural. Experienced traders utilize this moment to hold their bitcoins or diversify their crypto investment to other coins as well.

Figure 4: Sentiment Towards Bitcoin
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Data Source: Sentiment Viz

[1] Young, J. 2018. Bitcoin Price Rises to $6,450 as Market Stabilizes, Has Crypto Hit a Bottom? [https://www.ccn.com/bitcoin-price-rises-to-6450-as-market-stabilizes-has-crypto-hit-a-bottom/]. Accessed October 21, 2018.

[2] DataDash. 2018. Crypto Livestream | What’s the cause of bitcoin’s spike? [https://www.youtube.com/watch?v=gr7DZMLP7uo]. Accessed October 21, 2018.

[3] Bitfinex. 2018. Fiat Deposit Update — October 15th, 2018. [https://medium.com/bitfinex/fiat-deposit-update-october-15th-2018-18ddd276c3fd]. Accessed October 21, 2018.

[4] Kapoor, K. 2018. Massive Tether Sell-Off Causes Bitcoin To Surge Over $7500. [https://www.bitrates.com/news/p/massive-tether-sell-off-causes-bitcoin-to-surge-over-7500]. Accessed October 22, 2018.

[5] Godbole, O. 2018. Price of ‘Stable’ Cryptocurrency Tether Tanks to 18-Month Low. [https://www.coindesk.com/price-of-tether-stablecoin-tanks-to-18-month-low/]. Accessed October 22, 2018.

[6] Scanlan, G. 2018. Bitfinex Investigation Outcomes: Manipulations with the Fall in the USDT, Trading Bots Involved. [https://www.coinspeaker.com/2018/10/19/bitfinex-investigation-outcomes-manipulations-with-the-fall-in-the-usdt-trading-bots-involved/]. Accessed October 22, 2018.

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