Close on the heels of cover-up allegations against Bitfinex, the cryptocurrency market came under pressure with most of the digital coins struggled hard to stay afloat amidst a strong sell-off on Thursday. The total market capitalization of all the cryptocurrencies tumbled from $177 billion to $171 billion while the total trading volume per day was pegged at $53B.
The downfall in the crypto market started with the speculation that Tether is running out of money to guarantee its token value pegged to the dollar. Earlier, a top lawyer in the New York alleged that Bitfinex used cash reserves of Tether in order to cover up a loss of about $850 million. According to the allegation, Bitfinex used $700 million from Tether, and such a huge amount of cash outflow could possibly jeopardize the Tether’s ability to back its own dollar-pegged cryptocurrency. The market reacted quickly to news, and in a knee-jerk reaction, it fell abruptly, affecting most of the major currencies.
Specific Details of Controversy
According to the details emerging out of the office of the attorney general in New York, Bitfinex invested around $850 million in Crypto Capital based in Panama without disclosing this information to investors. After that, Bitfinex involved in a series of compromised transactions where it had been provided with access to the Tether’s funds. The office of attorney general revealed that this access was provided by Tether to cover up the massive investment Bitfinex made in Crypto Capital.
Reaction of Crypto Market
The largest cryptocurrency by market capitalization, Bitcoin dropped to $5,060 though later on, it recovered to the level of $5,240 at the time of writing. In the last 24 hours, the coin has registered a loss of around 3%, and it seems that the Tether controversy has taken a toll on fortunes of Bitcoin. In terms of short-trend, the situation appears to be bullish for Bitcoin as it is making an attempt to recover from the heavily sell-off domain. It is expected to reach the level of $5,240 and from there, it could further move ahead if the bull rally continues.
Ethereum has shown a strong resilience as it moved back from the lowest level of below $150 to above $156 value at the press time. This second largest cryptocurrency by market cap has suffered more than 5% decrease in its value as on Thursday, but technical trends do suggest that the coin is on its way to recovery. The overall volatility in its price moment is subsiding which provides a cue that in the coming days, the coin could post a strong recovery from its current level of exchanging hands. Ripple has also lost more than 2% value in its latest trading with its value pegged at $0.2956 at the press time.