The US Commodity Futures Trading Commission [CFTC] and the acting U.S. Attorney for the Southern District of New York’s announcement charging BitMEX with facilitating unregistered trading and other illegal transactions did not make good reading.
Since then, more than 45,000 BTC have been pulled from the exchange which represents over 20% of the Bitcoin deposited on BitMEX, and nearly 1% of the total circulating BTC supply. This was noted by analysis firm Glassnode which further revealed this resulted in a major drop of 27% Bitcoin balance on BitMEX. The figures fell to 120,000 BTC.
Notably, the largest drop happened on the 2nd of October, when 44,000 BTC were withdrawn from the exchange. This was observed to be the largest negative net flow until the date. Around 30% of those funds were transferred to crypto exchanges like Genimi and Binance in equal amounts.
It was not just the spot trading that was affected. On the derivatives front as well, Bitcoin’s open interest in perpetual futures contracts on BitMEX saw a significant decline by approximately 24%, from $590 million to $450 million. This level was last seen in May as the market was recovering from the Black Thursday crash.
But could this be an omen?
The US prosecutors filing criminal charges on the four founders of BitMEX which has been a crucial player in both spot as well derivatives space is worrisome. And despite the fact that this news did not have much impact on the broader cryptocurrency market, a space that is mostly driven by FOMOs and FUDs, was indeed a sign of maturity.
The recent accusations could potentially help Bitcoin, and the rest of the cryptocurrency market by extension, to grow. According to popular Analyst Willy Woo, cases like this would help platforms “to clean up their practices”. He further expects to see “less volatility, less scam-wicking, more spot volumes, more organic moves, more institutional money.”
Fundamentally the market is scared for all the wrong reasons.
MEX did NOT get hacked. No traders will lose coins.
Futures exchanges will clean up their practices.
We'll see less volatility, less scam-wicking, more spot volumes, more organic moves, more institutional money.
— Willy Woo (@woonomic) October 2, 2020
Bill Barhydt, Abra Co-Founder, and CEO had recently opined that the key reason as to why the US still does not have a Bitcoin ETF was because of markets such as Bitmex. He further went on to say that BitMEX is easily manipulated by large traders. He had further added,
“This episode will likely be a boon for other regulated futures exchanges that offer significant leverage. Gambling is gambling. If you work in crypto please wake up. If your firm hasn’t lawyered up then you’re working at the wrong firm. Hodlers and lawyers are the big winners here.”