Bitcoin has $300 premium on controversial exchange

PORTLAND, ORE. •Bitcoin continues to trade at nearly a $300 premium on the Bitfinex cryptocurrency exchange compared with rival platforms on speculation traders are dumping the socalled stable coin Tether in favour of the world’s largest cryptocurrency.

Over the past few days, Tether has broken out of its historically tight trading range around $1, fuelling uncertainty that investors may be losing faith in the coin. Unlike Bitcoin, whose value fluctuates wildly from day to day, Tether’s tokens are designed for stability.

Prices for the coins have historically stayed near $1 because Tether says each one is backed by a dollar in its bank accounts.

Bitfinex and Tether didn’t respond to a request for comment.

Tether, which shares management with Bitfinex, is now trading for 97 cents, and touched 85 cents earlier this week on at least one exchange. With a market cap of $2.1 billion, Tether is the largest of the stable coins, which are designed to let traders escape cryptocurrencies’ volatility and make transactions easier.

Many investors who bought Tether through Bitfinex are now trying to dump their holdings for Bitcoin, Alex Michaelis, co-founder of researcher CoinSchedule, said in an email.

“I don’t think Bitfinex is going under, we met with them last week and that is not the impression we got,” Michaelis said in an email. “What I think happened is that a lot of people think Tether is going bust, so they are exchanging their Tether for Bitcoin and pushing the price up there.”

On Oct. 15, Bitfinex said that a few days earlier it temporarily paused fiat deposits for certain customers amid “processing complications.” On Oct. 7, the company also said that “Bitfinex is not insolvent.”

While Bitcoin is trading for about $6,440 on most other exchanges, it’s going for $6,778 on Bitfinex.

“So if most Bitfinex traders are holding Tether instead of USD, then this represents the premium they need to pay,” said Richard Johnson, an analyst at Greenwich Associates who specializes in blockchain technology. “Another way of looking at it, is that holders of Tether have taken a 5 per cent haircut on their socalled stable coin.”