Bitcoin rebounded after hitting fresh lows on February 23 after positive news from Tether and Bitfinex over a multi-year legal case.
NY Attorney General ends crypto’s “most significant existential threat”
Coming a day after its largest hourly candle in history took the largest cryptocurrency to $47,400, bears had not had enough, deflating a bounce to $54,000 to erode support at $47,000.
In the face of intense volatility, naysayers were quick to dismiss Bitcoin, following in the footsteps of U.S. Treasury Secretary Janet Yellen, who on Monday described it simply as “inefficient.”
A day later, however, news that Tether and Bitfinex had reached a settlement with New York Attorney General Letitia James in a legal battle which began in 2019 served to change sentiment in an instant.
The topic of two years of criticism and scorn from cryptocurrency skeptics which both companies had frequently debunked as nonsense, the state’s legal case thus formally came to end with a modest settlement of $18.5 million. Tether further promised to provide quarterly updates on the backing for its USDT stablecoin, which is by far the most widely-used stablecoin asset.
“The settlement resolves allegations about public disclosures related to a loan Tether made to Bitfinex when Bitfinex was encountering challenges accessing approximately US$850 million in Bitfinex funds held by a payment processor in 2018. These events are by now well known,” Bitfinex said in a statement.
“…The Attorney General’s Office concluded, in essence, that we could have done better in publicly disclosing these events. Contrary to online speculation, after two and half years there was no finding that Tether ever issued tethers without backing, or to manipulate crypto prices.”
A series of private class action lawsuits against the companies seeking $1.4 trillion in damages for causing the crypto winter remain.
At press time, spot market volatility was still evident, with BTC/USD crisscrossing the $49,000 mark, up 4% in an hour.
For some, the impact of the settlement could have longer-reaching implications. Tether’s supply increases, which recently saw its market cap expand by $1 billion daily, were now bonafide in light of lawmakers finding no evidence of unbacked assets.
“The most significant existential threat to crypto has been lifted today,” Kyle Davies, co-founder of hedge fund manager Three Arrows Capital, summarized.
Bad luck for leveraged traders
More pain was felt among certain altcoin traders during Monday’s downturn meanwhile, as major exchange Kraken saw sudden price spikes which exacerbated already heavy losses, notably among leveraged traders who suffered massive liquidations.
In particular Ethereum and Cardano pairs saw problems, with ETH/USD briefly losing over half of its value, bottoming at $700.
A backlash ensued, with Kraken CEO Jesse Powell answering complaints personally. The irregularities, he said, were nonetheless not due to technical faults on the exchange’s side.
“Any amount of leverage is risky. This was effectively a grey swan event, a bad beat. You bet on black and came up 00. Depends on how you define trustworthiness,” part of one response read.
“Everything operated as expected, orders matched accurately, liquidations happened predictably.”
ETH/USD was back trading above $1,500 at press time.