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As 20m more Tether are issued today, I think it's important for people to know that an unbacked Tether could be a big reason for the recent bitcoin price rise. (x/post)

The Basics
What is Tether? It's a digital asset distributed on the Omni token platform, which allows for assets to be issued over the bitcoin blockchain. Tethers (USDT) are supposed to be valued 1:1 with USD. Any new USDT is only supposed to be issued when there is at least an equivalent amount of USD sitting in reserve that can be redeemed at any time.
The point of issuing USDT is to allow customers to easily transfer USD value to exchanges, to create a stable reserve token to hold in times of volatility, and to allow exchanges to participate in USD-reference trades without having to hold or deal with USD KYC/AML compliance requirements.
Vast quantities of Tether have been issued over the past several months, almost $340 million are now in circulation.
But there are some problems with Tether as we know it today.
The Problems
  1. Tether's website claims it's 100% backed, regularly audited, and users have 24/7 access... but that's the extent of their proof. You really just have to take the them at their word.
  2. Tether hasn't provided any public audits, despite a promise of full transparency on January 15th, 2015 when Bitfinex acquired Tether
  3. After losing $72 million in a hack announced on August 2nd, 2016, Bitfinex issued a redemption token called BFX to their customers as a promise to pay back what they owed. They began paying this back at an increasing rate, finally buying back the remaining 95% of liabilities between March and April 2017. One theory is that Bitfinex was issuing Tether to themselves to buy assets, pay back the BFX tokens, and appear solvent faster. As long as the public held trust that Tether was worth 1:1 on par with USD and there was no bank run, this activity would go unnoticed. At that time, there were approximately 50m tether issued.
  4. Around that same time, Bitfinex's US banking troubles began as Wells Fargo blocked 180m in funds belonging to their parent company ifinex and Tether:
  5. Bitfinex then filed a lawsuit against Wells Fargo and withdrew it a week later. They to this day have not been successful in establishing a US banking relationship for their customers. This is important, because in order to back Tether, they need to hold USD reserves. So they're either lying, or they have another banking relationship set up to hold $340m worth of assets as USD equivalent.
  6. On August 11th 2017 Bitfinex suspended verification for US customers. It then seems extraordinarily odd that they continue to issue enormous sums of USD-backed Tether, where does the money come from?
  7. On April 18th, Taiwanese banks also began blocking wires to the Tether backed bank, suggesting the funding mechanism for Tether is tenuous and subject to the whims of the banking industry:
  8. The Tether whitepaper has a section called "Proof of Reserves" process, which essentially boils down to "You can see whenever new Tether are issued, and the issuance comes from our bank deposits, ...and you're just going to have to trust us on the bank deposits" The whitepaper goes on detail a summary of weaknesses:
Their responses to these threats mainly try to minimize their severity by claiming other banks and exchanges have these same problems, we should trust their banking partners because they are 3rd parties to Bitfinex, bank transactions are traceable on some level even if not public, and we should trust Bitfinex because their business owners information is public.
Dodging questions
The co-founder of Tether, udecker, participated in an interesting thread where someone was calling out the weaknesses in the process. His arguments included responses like
See above about the TOS - of course you don’t have a right to redeem your tethers for fiat. Who are you? Get an account and go through thorough KYC/AML if you want to do any fiat operations.
Try simple logic. Running a fractional reserve would mean that the company couldn’t stay in business. Why would it do that?
If Taiwan closes Tether’s accounts? For what reason? Tether is a legally operating business in Taiwan.
His responses seem naive to the fact that bitcoin exchanges can and have been operating as fractional reserves in the past under the guise of solvency.
nobodybelievesyou repied:
Most of your answers here so far have boiled down to "this would never happen!"
You also dodged his question about the audit, which has been getting asked and dodged now for almost a year.
https://www.reddit.com/BitcoinMarkets/comments/4vhak0/usd_wallet_idea/d5zfa48/
udecker's only response to this was
At least your username checks out.
External scrutiny
Various redditors and crypto news agencies have taken note of tether's issues over time.
Implications
So why care? What predictions can we make from all this?
  • Bitfinex either can't provide actual, verifiable, 3rd party proof of it's reserves backing Tether, or so far has not cared to.
  • If there aren't enough reserves in the bank to back the USDT, then not everyone will be able to redeem them for USD. A sudden sell pressure would see prolonged withdrawal delays, and a drop in the value of USDT
  • Issuing unbacked Tether would allow an exchange to appear solvent and obtain assets at essentially zero cost, driving up the market price of many digital currencies in the process as their supply dries up.
submitted by digital_del to btc [link] [comments]

As 20m more Tether are issued today, I think it's important for people to know that an unbacked Tether could be a big reason for the recent bitcoin price rise.

The Basics
What is Tether? It's a digital asset distributed on the Omni token platform, which allows for assets to be issued over the bitcoin blockchain. Tethers are supposed to be valued 1:1, so $1 of USD = $1 USDT (tether) for instance. USDT is only supposed to be issued when there is at least an equivalent amount of USD sitting in reserve that can be redeemed at any time. The point of issuing USDT is to allow customers to more easily transfer USD value to exchanges, to create a stable reserve token to hold in times of volatility, and to allow exchanges to participate in USD-reference trades without having to hold or deal with USD KYC/AML compliance requirements.
Vast quantities of Tether have been issued over the past several months, almost $340 million are now in circulation.
But there are some problems with Tether as we know it today.
The Problems
  1. Tether's website claims it's 100% backed, regularly audited, and users have 24/7 access... but that's the extent of their proof. You really just have to take the them at their word.
  2. Tether hasn't provided any public audits, despite a promise of full transparency on January 15th, 2015 when Bitfinex acquired Tether
  3. After losing $72 million in a hack announced on August 2nd, 2016, Bitfinex issued a redemption token called BFX to their customers as a promise to pay back what they owed. They began paying this back at an increasing rate, finally buying back the remaining 95% of liabilities between March and April 2017. One theory is that Bitfinex was issuing Tether to themselves to buy assets, pay back the BFX tokens, and appear solvent faster. As long as the public held trust that Tether was worth 1:1 on par with USD and there was no back run, this activity would go unnoticed. At that time, there were approximately 50m tether issued.
  4. Around that same time, Bitfinex's US [banking troubles began](https://themerkle.com/wells-fargo-blocks-180m-in-funds-belonging-to-ifinex-and-tether-customers/] as Wells Fargo blocked 180m in funds belonging to their parent company ifinex and Tether:
  5. Bitfinex then filed a lawsuit against Wells Fargo and withdrew it a week later. They to this day have not been successful in establishing a US banking relationship for their customers. This is important, because in order to back Tether, they need to hold USD reserves. So they're either lying, or they have another banking relationship set up to hold $340m worth of assets as USD equivalent.
  6. On August 11th 2017 Bitfinex suspended verification for US customers. It then seems extraordinarily odd that they continue to issue enormous sums of USD-backed Tether, where does the money come from?
  7. On April 18th, Taiwanese banks also began blocking wires to the Tether backed bank, suggesting the funding mechanism for Tether is tenuous and subject to the whims of the banking industry:
  8. The Tether whitepaper has a section called "Proof of Reserves" process, which essentially boils down to "You can see whenever new Tether are issued, and the issuance comes from our bank deposits, ...and you're just going to have to trust us on the bank deposits" The whitepaper goes on detail a summary of weaknesses:
Their responses to these threats mainly try to minimize their severity by claiming other banks and exchanges have these same problems, we should trust their banking partners because they are 3rd parties to Bitfinex, bank transactions are traceable on some level even if not public, and we should trust Bitfinex because their business owners information is public.
Dodging questions
The co-founder of Tether, decker, participated in an interesting thread where someone was calling out the weaknesses in the process. His arguments included responses like
See above about the TOS - of course you don’t have a right to redeem your tethers for fiat. Who are you? Get an account and go through thorough KYC/AML if you want to do any fiat operations.
Try simple logic. Running a fractional reserve would mean that the company couldn’t stay in business. Why would it do that?
If Taiwan closes Tether’s accounts? For what reason? Tether is a legally operating business in Taiwan.
His responses seem naive to the fact that bitcoin exchanges can and have been operating as fractional reserves in the past under the guise of solvency.
nobodybelievesyou repied:
Most of your answers here so far have boiled down to "this would never happen!"
You also dodged his question about the audit, which has been getting asked and dodged now for almost a year.
https://www.reddit.com/BitcoinMarkets/comments/4vhak0/usd_wallet_idea/d5zfa48/
decker's only response to this was
At least your username checks out.
External scrutiny
Various redditors and crypto news agencies have taken note of tether's issues over time.
https://np.reddit.com/Bitcoin/comments/6719bj/tether_announcement_about_their_banking_problems/ https://hackernoon.com/the-curious-tale-of-tethers-6b0031eead87 https://cointelegraph.com/news/tethers-bank-problems-create-unease-as-token-value-slides-below-1 http://www.newsbtc.com/2017/03/21/tether-balance-sheet-unveils-large-discrepancy-usdt-usd-reserves/ https://medium.com/@bitfinexed/are-fraudulent-tethers-being-used-for-margin-lending-on-bitfinex-5de9dd80f330
Implications
So why care? What predictions can we make from all this?
  • Bitfinex either can't provide actual, verifiable, 3rd party proof of it's reserves backing Tether, or so far has not cared to.
  • If there aren't enough reserves in the bank to back the USDT, then not everyone will be able to redeem them for USD. A sudden sell pressure would see prolonged withdrawal delays, and a drop in the value of USDT
  • Issuing unbacked Tether would allow an exchange to appear solvent and obtain assets at essentially zero cost, driving up the market price of many digital currencies in the process as their supply dries up.
submitted by digital_del to Bitcoin [link] [comments]

Analysis of BFX USD swaps; bullish. Bubblish?

Under the auspices of Investors' relentless reach for yield in ZIRP/NIRP environment: it seems the savvy among them have struck upon a way to get decent income on savings. (Zero/Negative Interest Rate Policy) Loan it out to the Bitcoin Bulls on BFX.
Given that there are way more dollars than BTC, and a whole range of people who prefer income, albeit a derivative play on a dubious digital unit, as opposed to speculating on the underlying issue; AND given the lack of change in short interest; we can only deduce sellers are actually selling their holdings in a stealth accume regime from weak to strong Bitcoin Bulls on BFX.
The trend we all are witnessing, achieves its logical conclusion upon the expiration of either BTC sellers or yield searchers. I think the outcome is evident under Gresham's Law.
http://en.wikipedia.org/wiki/Greshams_law
TL;DR When fiat is the overvalued and BTC the undervalued, BTC gets hoarded by rational people.
Hence, Sellers will loose. After all sellers cannot compete with Citibank. The Citibank who just loaned me 10k on super easy terms. The same bank like so many other banks making loans like these to thousands upon thousands of people everyday.
I just happen to put my 10k in the swaps for hire. What I make in two weeks covers my carry all year. I am not alone.
Or maybe I just took the 10k and went full retard BTC. Bought 10 and then pledged it to purchase 25 more. That bull is not alone.
And then there are miners and early adopters selling the real coin daily. Whats that? 3600 coins, $2.32M. Pfft.
In the last 30days the USD swaps went to $30M from $24, an increase of $6M or $200k/day on average. The trend appears to take a parabolic shape with yesterday's increase $764k, and yet the Avg CFD rate is in decline on the same timeframe. Indicative of the hotness of Citibank money flowing in.

In the next month, I project we go to $42M USD swaps, an increase of $12M. Daily spikes in the $1.5M range. That's enough to satisfy over half the daily mining supply at today's market price.
Markets move on the margin, and while a $1.5M daily increase in swaps is not enough to absorb daily mining supply, I do think its enough to convince the strongest weak hands to maybe hodl a few days longer instead of sell. And that sort of thing leads to a virtuous cycle of psychological support. And that translates into support for higher prices. And in Bitcoin land that can only mean one thing. Im not saying bubble.
Tl;DR. The hot money replacing hot China money belongs to raphael_bitfinex :-)
e: username. Spelling. Grammar
submitted by mudduckk to BitcoinMarkets [link] [comments]

Sexomnia  House M.D. - YouTube

I'll admit it to this community, to my family, friends, etc. I had too many assets tied up in Bfx at the time of the hack. Assets were almost... BFX Tokens and BitCache Unleashed: BTCMANAGER's Week in Review 8 August Forum rules If you are posting news, press or any other related material that directly or in-directly benefits you, we request that you post a back-link to bitcoin.com by using a button, banner or text-link on your website. Bitfinex is a cryptocurrency trading platform, owned and operated by iFinex Inc. Since 2014, Bitfinex has been the largest Bitcoin exchange platform, with over 10% of the exchanges' trading. Bitcoin right now for use of transactions is rather difficult but as a store of value to buy large items or to store it for holding until a future date is very valid. 09:35 It also offers the best asset protection class, this is very important for a lot of people, because if you put your money in a bank, there might be potential ways for people to freeze it, even just by random coincidence. 09 ... Bfxdata - Charts and Stats for Bitfinex market data and margin funding

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Sexomnia House M.D. - YouTube

A woman comes to the clinic showing symptoms of pregnancy but when she tells House that she's not been sexually active in over a year, he discovers a startli...

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