CBX Weekly Newsletter // 31 July 2019
- Will BitMEX collapse?
- Company Square is focusing on accepting cryptocurrencies, especially Bitcoin
- Tether is King
Will BitMEX collapse?
After a heated up debate in Taiwan during the Asia Blockchain Summit featuring Nouriel Roubini, a well-known critic of cryptocurrencies, and BitMEX’s Chief Executive Officer Arthur Hayes, a report has come out saying that Bitmex exchange “may be openly involved in systematic illegality.”
Roubini, a professor of economics at the Stern School of Business, argues that BitMEX lets traders take on too much risk, allowing them to leverage trades up to 100 times the amount of funds they currently own. He also stated that liquidations in the exchange are constant and part of the business model, at times, account for a significant share of BitMEX’s revenue. He also argued that BitMEX trades against their clients.
Crypto derivatives trading platform BitMEX, which is based in the Seychelles, is hardly the only crypto exchange to offer customers 100 times leverage. And Hayes told Yahoo Finance last year that the exchange doesn’t make money when customers are liquidated and doesn’t trade against them.
A couple of days ago, the Commodities Futures Trading Commission (CFTC) launched an investigation to determine if BitMEX was providing services to US customers and also is looking at the exchange to determine any illegal procedures. After just days of the release of the news, BitMEX volume has been decreasing and Arthur Hayes which was very active on social media has stopped tweeting.
Roubini argues that Arthur Hayes belongs in prison, while others argue that he hasn’t done anything wrong therefore he shouldn’t face any responsibility. What do you think?
Company Square is focusing on accepting cryptocurrencies, especially Bitcoin
Last Monday, Steve Lee which is the head of Square’s crypto team said during a Twitter ask-me-anything (AMA) that the company is focused on Bitcoin.
Here is a recap of the most outstanding tweets:
One user asked why the company wasn’t creating its own token as other companies have done in the past. Square Crypto responded by posting a tweet from the company’s founder:
Tether is King
Chinese importers in Russia are buying up to $30 million a day of the infamous Bitfinex’s Stablecoin Tether (USDT) from Moscow’s over-the-counter trading desks. They use the cryptocurrency to send large sums back to China and bypass all the strict capital controls. Before 2018 market crash of cryptocurrencies most of the merchants used bitcoin for this, but now they switched to tether, which is designed to mirror the price of the U.S. dollar.
Despite the bad reputation regarding the token and longstanding questions about USDT’s collateral, in this market “nobody actually cares if Tether is backed or not,” says one Moscow trader.
Tether’s best-known use is allowing crypto traders to move funds between exchanges to take advantage of arbitrage opportunities or to simply sell your Bitcoins into dollars without encouraging the fees and time-wasting process to exchange the crypto into fiat, not to mention that volatility could affect the price when it reaches your wallet.
The total volume of USDT purchased by Chinese businesses can reach $10 million to $30 million daily, which makes Tether a great use case for importing goods into the country.
“They accumulate a lot of cash in Moscow and need Tether to transfer it to China,” said Maya Shakhnazarova, head of OTC trading at Huobi Russia, the Moscow office serving high-roller clients of Singapore-based exchange Huobi Global.
If you want to buy or sell USDT for dollars from Tether itself, the user must be verified through the company’s know-your-customer (KYC) process. However, since the token runs on top of public blockchain networks (bitcoin, ethereum and tron), anyone can receive or send it, and secondary trades are unrestricted.
Back in China, even though the People’s Bank of China banned fiat-to-crypto spot trading in September 2017, the merchants are still exchanging USDT for fiat without raising concerns.
Once the Chinese trader wants to liquidate their crypto assets into Chinese yuan they can still go to an OTC market maker, such as those registered on exchanges like Huobi and OKEx, to get matched with buyers and send them crypto after receiving a wire transfer via a bank, AliPay or WeChat Pay.
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