Vinny Lingham, a leading trade analyst recently suggested a very ominous theory about the ‘Bitfinex Premium’ being charges for over a week now. It refers to the surcharge on Bitcoin being explicitly charged on the Exchange.
The ‘Bitfinex Premium‘ at 12: 40 Hours UTC on 4th May 2019 is around $320 w.r.t Coinbase and Bitmex. It is about 5% of the weighted average of the price of Bitcoin on Exchanges. While this has attributed to the rise in the price of Bitcoin [BTC], it makes traders apprehensive due to its consistent abnormality.
It signified that the demand for Bitcoin on Bitfinex is exceeding sell orders will w.r.t. FIAT and other altcoins. Moreover, the arbitrage traders have not been able to sweep the profits from the difference, or they choose to abstain from the Exchange altogether.
Reminisce of the Issue at Mt. Gox?
Either way, while the price is in the green, the abnormality reminisce of one the biggest and most popular Exchange Theft in the history: Mt. Gox.
A lot has changed since then, like significant trading volume, better price discovery methods, and a more significant number of institutions and researchers including Governments that are tracking the blockchain and its price. Nevertheless, in accordance with the economic principle of ‘law of one price‘ of freely traded goods, it raises concerns about the situation at the particular Exchange.
“Who remembers when a market premium started forming on Mt. Gox? Ahh, the good old days… “
The tweet is riddled with an ominous irony. The “good old days” Lingham is suggesting points to the early days in Bitcoin from July 2013-January 2014. During the time, the premium at Mt. Gox ranged above 10%. During that time, the price was letting a good story. However, it slowly built up to the destructive crash of 2014; the bear market extended for a year post the event.
Nevertheless, the percentage of trading at Mt. Gox at that time was considerably higher than Bitfinex’s trade volume when compared to other Exchanges presently. However, the premium issue must be resolved soonly before the market is misled toward a disaster once again.
What do you think are some of the other views and theories about the Bitfinex Premium? Please share your views with us.
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Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com