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After last week's fiasco between BitFinex and Tether, when New York Attorney General Letitia James had to intervene after a court decision, investors expected the market for cryptography currency becomes bearish. The bitcoin rate against the US dollar (BTC / USD) initially fell and fell below the $ 5,000 level to $ 4,971. However, to everyone's surprise, he ended the busy trading week above coveted psychological support, around $ 5,000 per bitcoin.
The problem is that there is a substantial divergence between the price of BTC / USD on most cryptocurrency exchanges and BitFinex.
On Sunday, the BTC / USD exchange rate of the popular Coinbase currency exchange market was trading around $ 5,190. However, at the same time, BitFinex indicated a price of BTC / USD close to $ 5,500!
If we look carefully at the linear charts of the BTC / USD price of Coinbase and BitFinex since the beginning of the week, it is clear that, from time to time, the price diverges on these two exchanges. The fact is that it is perfectly normal to have a small price difference between stock exchanges because of the difference in volume of trade and the conditions of supply and demand.
The cryptographic community is used to differentiate the differences between BitFinex and other exchanges such as BitMEX. However, when the price differential was $ 300, or about 6%, it prompted badysts to look for the reason for such a large divergence.
Why BitFinex quotes the price of bitcoin at such a high level
If you have followed the bitcoin price gap between BitFinex and other cryptocurrency exchanges, this phenomenon should not come as a surprise. Just a few months ago, the Reddit user on Reddit had asked a similar question: "How is it that the BTC price on BitFinex is almost every time significantly higher than the other stock exchanges?"
In fact, if there is such a large price gap, anyone with basic knowledge of finance and the market efficiency badumption will argue that this offers a good opportunity for arbitrage. So, why does not an opportunistic trader profit from arbitration?
Alan Masters of TradingView offered a possible explanation: while the price of BTC / USD goes up on BitFinex, the Exchange does not display any significant trading volume.
Therefore, cryptocurrency investors should not pay much attention to rising prices. After all, in the event of pending litigation, most BitFinex traders do not like trading and only a few low-volume orders on the market can move the price as trading liquidity decreases.
However, the best explanation came Jeff Garzik, co-founder of Bloq Inc.
This is the output of purchases. To exit an exchange, one must buy a "hard currency" – BTC – when the trust's withdrawal methods begin to fail. The price of the BTC is therefore higher at the dead points of sale.
We have seen this data model repeatedly in the history of cryptography, including but not limited to MtGox.– Jeff Garzik (@jgarzik) April 26, 2019
It seems logical that the low bitcoin bids on BitFinex are actually investors on the platform who buy bitcoin at a higher price in order to escape trading for good. After all, with all the suspicious activity at BitFinex, any rational investor would be happy to pay a premium to withdraw his money from the stock market.
The final result
While market badysts were expecting Bitcoin to become bearish, in reality, cryptocurrency investors have shown great resistance to bearish pressures and have kept the BTC / USD price higher than expected. above the level of 5,000 USD. This indicates that the market is optimistic and that the bullish rally may have enough legs to continue the uptrend in the coming weeks.
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