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Traders Withdraw Over 40K Bitcoin from BitMEX as Company’s Legal Woes Kick-Off

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Top cryptocurrency derivatives exchange platform BitMEX is currently battling a hoard of criminal charges from the United States government. While the Seychelles-based exchange has denied any wrongdoing, the scandals appear to be causing it to bleed customers.

Antsy Traders On the Move

According to data from Glassnode, traders have withdrawn about 45,000 BTC tokens (worth about $420 million) from the exchange since its row with the U.S. government began. The blockchain data tracking firm had previously pointed out that BitMEX lost 23,200 BTC (about $243 million) in a single hour, marking the most massive hourly outflow that the exchange has ever recorded. 

As Glassnode added, BitMEX wallets initially held about 170,00 BBTC (worth about $1.8 billion). This significant outflow of assets will undoubtedly hurt the firm.

Along with the outflows, open positions on Bitcoin futures contracts on the exchange have dropped by 20 percent, according to data from market analytics firm Skew. As the drop in assets, it is most likely that the government indictment case caused this hit to open positions.

Data from Crystal Blockchain corroborated the Glassnode report, explaining that net outflows from BitMEX continue to rise. The data analytics firm also posited that Huobi, Binance, OKEx, and Gemini had been the investor flight’s biggest beneficiaries. The four exchanges alone have reportedly taken in 20,000 BTC of the transferred assets.

Things Could Get Messy

The drops in metrics are coming from a significant BitMEX charge that dropped earlier this month. On October 1, the United States Commodity Futures Trading Commission (CFTC) filed a complaint against the Seychelles-based exchange, accusing it of operating an unregistered trading platform and violating Anti-Money Laundering (AML) violations. 

The filing, which was placed at the Southern District of New York, named five entities and three individuals who own the exchange. They include Arthur Hayes, BitMEX’s CEO, Samuel Reed, and Ben Delo. Other entities include and HDR Global Services (Bermuda) Limited (BitMEX), ABS Global Trading Limited, HRD Global Trading Limited, Shine Effort Inc., and 100x Holding Limited.

As the Commission explained, it believes that BitMEX had been illegally offering leveraged trading services to traders. Since its inception in 2014, the exchange reportedly offered leveraged trading to the tune of $1 trillion. It also charged BitMEX of violating basic compliant procedures, including failure to register with authorities and a lack of any AML and Know-Your-Customer (KYC) procedures.

The agency confirmed seeking disgorgement, civil monetary penalties, permanent trading bans, and injunctions against future violations. Besides the charges, the Court also indicted the three aforementioned individuals – as well as BitMEX’s Head of Business Development Gregory Dwyer – of violating the Bank Secrecy Act. If convicted, they could each face five years in prison and pay fines of about $250,000. 

FBI Assistant Director William Sweeney claimed that one of the company’s executives had bragged about the firm being incorporated in a jurisdiction outside of the U.S. because it would be easy to bribe their regulators. The Department of Justice confirmed in a statement that Reed was arrested on Thursday morning in Massachusetts. The other company executives are still at large.

Traders Withdraw Over 40K Bitcoin from BitMEX as Company’s Legal Woes Kick-Off

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Binance Coin (BNB) and OKEx’s (OKB) Exchange Tokens are Undervalued, while KuCoin (KSC) and Bitfinex (LEO) are Overvalued: Report

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The Token Insight team notes that in the crypto-asset sector, it’s always challenging to accurately provide realistic valuations for digital assets. At present, there’s no consistent or uniform industry-standard or reliable valuation method that would allow us to discover the real value of cryptocurrencies, the Token Insight team states.

Many digital currency exchanges have issued their own platform tokens which are supposed to directly relate to the performance of their platform or overall business. Exchange tokens are a “unique” category of crypto-assets and may be “fairly evaluated,” because of their inherent properties of “stable currency flow,” according to a report from Token Insight.

The report states:

“We have found that the transaction [volume] on exchanges is highly correlated to the market, directly affecting the [revenue] of each specific exchange.”

The Token Insight team has created a quantitative method which allows them to “construct the valuation of exchange tokens structure,” so that they can perform standardized analysis for exchange tokens based on the exchange’s activities, and then be able to determine the “actual value behind each exchange.”

The report notes that Binance Coin (BNB) has had “a very strong positive correlation with the majority of exchange tokens in Q2 2020, but the rolling 30 Day correlation with other exchange tokens has dropped significantly.” Meanwhile, HitBTC’s HBC is exhibiting “an extremely negative correlation with the majority of others in Q2, [and] the rolling 30 Day has changed to almost all strong positive correlation intervals.”

Huobi Token (HT), FTX exchange (FTT), HitBTC (HBC), and Bitfinex’s (LEO) have “a relatively high rolling 30 Day correlation.”

Based on these findings, the report claims that Binance’s BNB token and OKEx’s OKB token are undervalued. Huobi’s HT and FTX exchange’s FTT are also currently undervalued, according to the report’s analysis.

HBC is valued at around what it should be, the report claims. Meanwhile, KuCoin’s exchange token, KCS is overvalued. BitMart’s BMX token is valued at approximately the price which it should be, given current market conditions, the report noted. It added that Bitfinex’s LEO token is overvalued.

These exchange based cryptocurrencies aim to serve mainly as utility tokens, meaning that they may be used to qualify for special discounts while conducting transactions on digital asset trading platforms. They’re really meant to encourage users to trade more, because investors are “rewarded” with exclusive offers that are not available to others who may not hold these exchange tokens.

Binance Coin or BNB is by far the most successful exchange token. It currently has a market cap of over $3 billion and is accepted in many other places or platforms, besides just Binance. It can be argued that BNB has emerged as one of the most widely-accepted cryptocurrencies.

While BNB has been successful, like many of Binance’s other initiatives, the exchange continues to offer services in multiple jurisdictions without authorization.

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