CRYPTO MOVERS AND PRICES
CRYPTO STORY OF THE DAY
This Week, The Spread Of Crypto Prices On Bitfinex (BFX), Which Has Traded At A Premium For The Majority Of The Last 18-Months, Collapsed - We Provide Context & Insights
In spite of continuing to be the world's largest crypto/fiat onramp, the BFX spread has become a mainstay in the space over the last 18-months. Exchange premiums generally result from banking issues for those trading venues. In the case of BFX, their spreads emerged following a period of withdrawal delays (and eventual halts) resulting from customer funds getting held-up in the now infamous Crypto Capital case. At the height of the banking concerns, BFX spreads briefly traded to premiums as high as ~15% gross. Ultimately, months later, through several different means, withdrawal functions normalized. That said, due to memory of the episode and likely the subsequent NYAG investigation, BFX spreads continued to trade in the range of a 50 bps premium for the majority of 2019. This week the spread collapsed to 0 and at times traded at a discount.
Crypto Takeaway: It is not exactly clear what finally caused the BFX spread to consolidate. There does not appear to be incremental news around the NYAG case and any stories we've heard about trading flows appear anecdotal. It could simply be that the market has begun to look past 2019 issues with the state of the platform's customer funds appearing fully in order and predicting that the page will be turned on a tough year. If that is the case, the development is positive for crypto. We have outlined several times that exchange stress and decreased confidence in trading venues generally is one of the most significant factors in mid-term crypto-price declines. A regaining of confidence in arguably the most important platform in crypto is particularly supportive.