CFTC’s investigation may be contributing to BitMEX’s outflows dwarfing exchange’s inflows

  • 20 July 2019, Saturday, 12:40

The cryptocurrency community went haywire after Bloomberg, citing an anonymous source, reported that Arthur Hayes’ BitMEX exchange is under investigation by the CFTC for breaking trading regulations BitMEX was allegedly accused of offering Bitcoin derivatives and future products, without having necessary permission for the same, as well as allowing trading for US-Based clientele.

The report alleged that BitMEX leveraged 100x for Bitcoin trading, exposing traders to high risks, while probably having broken a few anti-money laundering regulations as well. The news spread like wildfire and led to prevailing a sense of fear among traders on the platform. The fear among traders was quite visible from the great imbalance between the inflow and outflow of capital from the exchange.

At press time, the inflow of funds on the exchange was down by 50.65% on the 24 hr chart, with the total amount going into the exchange being $11.48 million. In comparison, the outflow was 6 times greater, surging by 357.34%. The total amount of funds taken out from the platform in the last 24 hrs stood at $84.79 million, at press time.

BitMEX is not registered with CFTC

The sudden spike in outflow was triggered by the Bloomberg report. However, it is important to note that BitMEX is not registered with the CFTC. Instead, its headquarters is located in the Republic of Seychelles.

Previously, the CFTC had asked BitMEX to discontinue its services for US-residing traders, which they had to agree with. But, the report conveyed that the investigation began with the suspicion that BitMEX, despite the requested blocking of services, continued offering its trading services to US traders. While the report itself did not impact the crypto-market, it seriously hampered BitMEX’s reputation and created a sense of fear among traders.

The allegations against the exchange are quite serious and if there is not much clarity on the status of the investigation, the large outflow of funds might continue.