Net Outflows Despite Bitcoin Spike; Court Grants Bitfinex Motion; Poloniex Cuts Altcoins From U.S. Customers

Leading the crypto headlines over the past 24 hours: reports emerged there were more investors cashing out, than in, during the huge crypto price spike this week; Bitfinex had their motion to modify an injunction from the Attorney General granted; and Poloniex made the decision to disable nine altcoin markets for U.S. customers.

The market-wide price rally came to an abrupt halt overnight. At the time of writing, bitcoin (BTC) and ether (ETH) are trading at $7,297.9 (-8.7%) and $239.9 (-8.1%), respectively. Additionally, the MVIS CryptoCompare Digital Assets 10 Index is currently tracking at 3,698.1, a 4.9% rise over the past 24 hours.

Investors Cashed Out Whilst Bitcoin Spiked, Blockchain Data Startup Finds

Despite the substantial price rises seen in the cryptocurrency market this week, there has been more money leaving the market than entering it. That is according to London-based blockchain data startup, TokenAnalyst, who told Bloomberg it estimates withdrawals from trading platforms including Bitfinex, BitMEX, Binance, and Kraken exceeded inflows by roughly $622 million over the past five days.

For Bitfinex in particular, it’s seen customers withdraw more than $1.7 billion worth of bitcoin and ether since April 26, a day after the Supreme Court of New York received a legal petition filed by the New York Office of the Attorney General (OAG). This filing alleged Bitfinex lost $850 million and subsequently used funds from affiliated stablecoin operator, Tether, to hide the shortfall.

New York Supreme Court Grant’s Bitfinex’s Motion to Modify Injunction

Speaking of the OAG’s allegations against iFinex – the parent company of Bitfinex and Tether – yesterday saw the Supreme Court of New York grant Bitfinex’s motion to modify an injunction from the OAG.

According to an announcement by Bitfinex, the “court’s order allows Bitfinex and Tether to continue their normal business activities.” Additionally, the order also states the original injunction by the OAG will expire in 90 days and that any motion to renew will be the responsibility of the OAG.

Poloniex Cuts Off U.S. Customers From Nine Altcoins

U.S.-based crypto exchange Poloniex announced it had chosen to disable the trading of nine altcoins for customers residing in the U.S. The nine altcoins were: Ardor (ARDR), Bytecoin (BCN), Decred (DCR), GameCredits (GAME), NEO Gas (GAS), Lisk (LSK), Nxt (NXT), Omni (OMNI), and Augur (REP).

Poloniex, which was acquired by fintech startup Circle last year, told customers a lack of regulatory clarity in the U.S. was the reason for their decision. Specifically, the crypto exchange explained “it is not possible to be certain whether U.S. regulators will consider these assets to be securities.” Poloniex emphasised the fact the nine altcoins will remain available for trading to customers outside the U.S.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com