BitMEX is currently the largest Bitcoin Exchange according to trading volume, and BitMEX research is going pretty good regarding market research, but is BitMEX really that ethical? Let us explore.

Registered in Seychelles, BitMEX is not required to report to any regulator. This article is sourced through various articles submitted on Medium, Reddit and social media like Twitter.

 

Does BitMEX trade against its Customers?

Before I start to answer this question, let us understand the concept of Market Making. Market makers are the one responsible for filling up the order books. They also buy and sell continuously, proving the necessary liquidity to the market.

Market makers quote on both sides of the order book, that means both the buy side and the sell side. If their buy order gets executed, their immediate plan is to execute the sell order as well, thus acting as a neutral market maker. So a market maker profits from a spread instead of up-down movements of the market, in return offering quick liquidity to the users.

The question is thus, is BitMEX acting as a neutral market maker (which is a positive service to its customers) or not.

On 30th of April, 2018, MitMEX updated its Terms of Service. It says:

“BitMEX has a for-profit trading business that, among other things, transacts in products traded on the BitMEX platform. The trading business primarily trades as a market maker”

 

BitMEX also states that its profit does NOT come from trading:

 

BitMEX claims that its goal is to breakeven regarding profit and loss and that they make money by the service fee paid by the business. But unfortunately, there is no way to check BitMEX’s audit report as they have never released an external audit of their business.

BitMEX’s legal counsel, Sullivan & Cromwell was silently removed from their blog post from April. It’s earlier post stated this:

Later in May 2018, the updated post said this:

It is a possibility that Sullivan & Cromwell separated from BitMEX because it had issues with the exchange’s plans.

 

BitMEX’s Desk should not be allowed to trade freely on the exchange

Let’s assume the owner (or owner’s employees) of an online casino is allowed to play its own game, can he resist from not looking at everyone else’s cards?

Same goes with an online Bitcoin exchange. If BitMEX’s desk is allowed to trade on their own exchange freely, we can expect a similar outcome. This gives “extra information” to the desk, which is not available to all other customers. While some information is available to all the customers, for example, the order book or the past trades, additional information like the degree of leverage of each position or the price at which it will run out of margin is private and is only available to the BitMEX’s desk.

In a blog post, BitMEX has denied that it gives this explicit information to its desk, but BitMEX has not agreed to give out equal information to all the customers especially the two mentioned above.

Many users suspect that BitMEX gives unfair advantages to its desk. What are your views on the above? Comment below and let everyone know.

The US Department of Justice and the Commodity Futures Trading Commission are setting up an inquiry on Tether’s role in the price manipulation of Bitcoin during the massive growth of the cryptocurrency last year.

Earlier this year, the department of justice was initiating a criminal probe in the role of traders for price manipulation of Bitcoin in 2017 end when it reached an all-time high of $20000. Now the department is suspicious of the involvement of Tether and Bitfinex Exchange in the same matter. The department believes that the price of bitcoin was forcefully pushed up with the help of Tether Stablecoin.

 

The Investigation

The department is currently carrying out an investigation to determine whether Bitfinex along with Tether practiced illicit trading activities to increase the price of bitcoin. Earlier the US Commodity and Futures Trading Commission was also investigating the activities of both Bitfinex and Tether and now both the departments will together investigate into both the cryptocurrency companies. The officials have not disclosed yet whether the investigation is only on the companies or on the company executives as well.

Earlier this year, a professor of Texas University examined the involvement of Tether for manipulating the price of bitcoin by using trading algorithms to increase the prices. The research disclosed that Bitfinex Exchange uses Tether Stablecoin to buy bitcoin when the price is low using algorithms.

 

Tether Defends

Tether, however, defended themselves by calling all the statements as false. Tether explained that the there is a limited supply of the USDT tokens and that every USDT is backed by 1$ which is kept by the company in their bank account.

What do you think about the above statements in relation to Tether and Bitfinex? Tell us in the comments section below.

In an official announcement on Wednesday, October 24, Tether, the issues of questionable stablecoin USDT affirmed that it has “redeemed a particular amount” of USDT from dissemination.

 

In the most recent month, the market cap of Tether (USDT) is on a downfall. The most recent official announcement originating from Tether noticed that it will now destroy 500 million USDT tokens from its own treasury wallet. The total articulation from the organization peruses:

 

“Throughout the previous week, Tether has redeemed a lot of USDT from the supply. In accordance with this, Tether will destroy 500 million USDT from the Tether treasury wallet and will leave the rest of the USDT (approx 466m) in the wallet as a preliminary measure for future USDT issuances.”

 

There is not a lot suspicious seeing the current procedure as “Tether issuance and redemption process is laid out in the Tether whitepaper. The firm expresses: “each tether issued or redeemed, as openly recorded by the Bitcoin blockchain will compare to a deposit or withdrawal of funds from the [company’s] bank account.” One can check every one of the issuances and redemptions by checking the parity in the Tether Treasury wallet on the OMNI blockchain.

 

From the official announcement, obviously, the 500 million worth USDT tokens which were redeemed and destroyed contributed 52% of the aggregate supply. While discussing fiat accounting, the Tether whitepaper takes note of that piece of “the ‘Solvency Equation’ for the Tether System [… ] the probability of [U.S. dollar reserves] will depend on a few procedures”. This incorporates distinctive professional audits and also the Tether’s production of bank account adjusts on its Transparency page (“Proof of Funds”).

 

There have been a few questions cast on Tether’s transparency direct in the crypto business. Numerous specialists trusted Tether to have a suspicious association with Bitfinex exchange. A few allegations say that Tether used to source extra USDT tokens to Bitfinex without really backing them with physical USD. Moreover, a few allegations recommend that Bitfinex has been misleadingly blowing up Bitcoin value utilizing the USDT tokens.

 

Questions about Tether’s suspicious conduct began getting steam after Tether broke down its association with third-party auditor Friedman LLP, prior this year in January. In any case, later in June, Tether got its stores examined from Freeh Sporkin and Sullivan who said that Tether had adequate stores for its coursing tokens held in an undisclosed bank.

 

In another unforeseen development, a few reports likewise said that Tether is moving out of the stablecoin business. These cases were advanced by Su Zhu, Chief Executive Office of the Singapore-based fund manager Three Arrows Capital and an analyst under the name “Hasu”, in a medium post.