Coinmarketcap, a crypto market data provider has removed Bitfinex’s BTC trading prices from its weighted average calculation. Coinmarketcap made this decision as Bitfinex exchange continues battling claims of covering its losses using Tether’s (USDT) cash reserves.
According to a report, the New York Attorney General office (NYAG) claims Bitfinex hid a loss of $850 million. These claims have seen Bitfinex’s name take a big blow.
Bitfinex Goes Against Coinmarketcap’s Methodology Terms
Coinmarketcap’s methodology for including price data from exchanges states,
The price of any cryptocurrency is a volume-weighted average of market pair prices (1) for the cryptocurrency.
This means if a pair contributes a higher percentage of volume, it would have more influence on the average price. Coinmarketcap uses weighted averages because markets with high liquidity rarely face price fluctuations.
Some prices are removed manually from the average. This omission is denoted by an asterisk (*) on the markets tab if the price does not indicate a free market price. An example of such an instance is when a crypto exchange disables withdrawals or deposits, or when crypto rules bar anyone out of a certain geographic location from buying coins.
Additionally, Coinmarketcap notes that its algorithm excludes some prices if it detects that the reported price differs from other market pairs for the same coin. Such an instance is denoted by three asterisks (***) on the markets tab.
Bitcoin’s Premium Price
After the news of NYAG obtaining a court order against Bitfinex’s parent firm Ifinex broke, Tether (USDT) holders began cashing out their holdings. They converted their funds into ETH and BTC. Consequently, prices on the platform surged. Since then, BTC has been trading at a $300 premium on the exchange. Due to this, Coinmarketcap decided to exclude it from its market cap calculation.
For the past one week, BTC has been posting gains. According to Coinmarketcap’s data at the time of writing, BTC is trading at $5,704. The coin’s price on Bitfinex is approximately $6,000. This price is higher compared to prices from other major exchanges like Coinbase and Binance.
Excluding crypto prices from leading crypto exchanges is not a new thing on Coinmarketcap. At the beginning of the year, the crypto market data aggregator removed BTC prices quoted by major crypto exchanges such as Bithumb, Coinone, and Korbit. Although Coinmarketcap did not make an official statement, the cause of these exclusions was big differences from the rest of the world and limited arbitrage chances.
Reportedly, Bitfinex is thinking of raising funds through a token sale to cover losses from its frozen funds. The exchange has not yet unveiled the details of the sale. However, Dong Zhao, one of the exchange’s shareholders said the token sale will only be open to qualified foreign investors. The minimum buy-in amount will be $1 million. He added that there will be a supply of one billion tokens and each will be worth $1.
How long do you think it will take for BTC prices on Bitfinex to stabilize? Let us know in the comments below.