Signs of Crypto Spring: What do Binance, Bitfinex, and Consensus Conference Have in Common?
By: Yaniv Feldman
Tags: Binance, Consensus 2019, Bitcoin, Bitfinex, Cryptocurrency

It’s been a hell of a week. Literally. With Binance losing over 7K BTC and the Bitfinex/Tether debacle keeps getting more and more complicated, it seems like everyone should be running away from crypto. But they are not. We are not. BTC price is (as of this writing) at a 6-months ATH after breaking the $6K barrier just yesterday. Why do you think that is? Does it have anything to do with NY Blockchain Week and Consensus Conference that is due next week? In this week’s analysis, we’ll dive into the leading narratives of the week and see if the “Consensus Pump Narrative” still holds water.

Bitfinex to issue a token (again) to cover its $850M lost

We’ve covered the Bitfinex/Tether debacle in-depth last week, but there have been new developments this week, mainly the official announcement of a $1B token sale by the exchange, following a more recent statement by Dong Zhao (a Bitfinex shareholder) claiming that the company already line up $1B in both hard and soft commitments.

As the technical details around the token and the sale itself are still fuzzy, it seems that the tokens will be repurchased using 27% of Bitfinex’s monthly profit and in case the lost funds are “unfrozen”, at least 95% of the “unfrozen” funds will be used to redeem and burn the LEO tokens issued in the upcoming sale. In addition, LEO will also offer discounts on trading feeds including a 15% discount of taker fees for crypto-to-crypto trading, discounted lending rate, and discounted withdrawal fees.

Market effects: It seems that the market has taken the entire event rather lightly. After dropping over 8% following the original announcement by the NYAG, the market quickly recuperated and has risen to levels higher than before the announcement. On a side note, Bitfinex did open a rather wide BTC premium gap compared to the rest of the market (peaking at ~$400, which are a little over 6% of BTC price at the time), showing the market is pricing the risk in trading with Bitfinex due to the latest events. Since then, probably due to the official announcement of the sale and supposed commitments, the gap has narrowed down to less than $140 (which are less than 3% of BTC price), an even lower premium than the one that existed before the recent debacle. This premium exists mainly due to the Bitfinex’s 3% withdrawal fees which are significantly higher than the rest of the market.

Binance hacked, Looses over 7K BTC.

Chinese crypto exchange Binance suffered a significant hack on Tuesday. The company formally notified the public that the hackers had employed a diverse range of tactics to gain access to sensitive information and performed a single transaction sapping 7,000 bitcoins from Binance’s hot wallet, roughly 2 percent of the company’s entire BTC holdings. Binance will use reserves from its Secure Assets Fund for Users (SAFU fund) to compensate clients. Post-hack, it seems that the hackers are moving their stolen BTC into smaller and smaller wallets in an effort to hide their tracks. But the hack, which isn’t a first for Binance, wasn’t the real topic of discussion. In the announcement about the hack, Binance CEO, CZ, said he was considering a rollback of the Bitcoin blockchain to recover the funds. While he quickly withdrew the idea, after contemplating its potential impact on public perception of Bitcoin, the debate around whether such a play would be good, bad and even possible, let alone its effects on the industry has taken center stage.

Market effects: While in Bitfinex’s case, it took the market nearly a week to bounce back to previous levels, in Binance’s case, it took less than 24 hours for Bitcoin’s price to return to prior highs and even break them soon after. Whether it was the fact that it was “only” $40M and not $850, or the fact that CZ promised that all the money would be returned with Binance’s SAFU insurance fund, it seems that the market has learned to price such events at face value, instead of the usual FUD we got used to in previous years.

The debate on the whether CZ really does have the power to push a re-org on the Bitcoin Blockchain is a bigger and more important one to have, as it speaks volumes on Bitcoin’s actual decentralization and the ability of one person to control the blockchain if “he chooses to.”

Are you ready for the “Consensus Pump”?

Consensus conference has become one of the most critical events in the crypto space since it was the first event in 2015. While only four events were held until this year, the hype around the conference and the announcements during the event, always had some kind of flare that sent the crypto market to new highs. But last year things went sideways. Not only was the entire market going bear, but it seemed that the infamous “Consensus Pump” has lost its mojo and even the largest crypto event in recorded history can’t stand the big bear.

With the fifth annual Consensus just days away, and knowing that the conference can have a powerful impact on the growth of the market and industry, we wanted to remind you how things looked in the last four years before and after the event.

Even though it doesn’t mean anything, if you look at the average of the past four years of post-Consensus data, it seems like Bitcoin price rose on average 77%, while altcoins rose an average of 160%. If Bitcoin can keep its bullish momentum from the last few weeks, we just might see it at $10K in the next few months. But the world doesn’t work on average, so we probably won’t.

Clearing Out Crypto Winter, Hello Crypto Spring!

It seems like Bitcoin has aligned itself with the actual seasons of the year. Since early April we’ve been seeing an increase in both price and fundamentals of Bitcoin, as well as a chain of events that indicate market sentiment is changing. Just like natural spring, it doesn’t mean it can’t rain anymore, but it seems that the snow days are over. The market’s reaction (or lack thereof) to both Bitfinex and Binance’s latest news is another proof that the winter as gone. In bull markets, even significant events that should have a negative effect on the market seem to have a minor one (if any). In our case, the market didn’t ignore the events completely, it just learned to price them at face value rather quickly and narrowed the actual effects into the relevant places (Bitfinex premium, Tether, and BNB) instead of throwing FUD on the entire market. Getting ready for consensus next week, it would be interesting to see how the market would react, and I recommend to follow carefully for interesting announcements and see how the market reacts. A return of the Consensus Pump might be the breaking point we are all waiting for to take us back to bull territory.