First Global Credit’s CEO: Bitcoin has emerged stronger from recent hacks

posted about 6 years ago
Since the Bitfinex hack, BTC capital markets have shown resilience and pricing risk is more realistic, according to Gavin Smith, CEO of trading and financial services firm First Global Credit, who offered a positive assessment of the post-Bitfinex environment at the recent Capital Markets Blockchain Conference in London.

Smith gave a summary on how his company and others have reacted to the Bitfinex hack. Market participants took collateral not required to fund existing hedge positions and put it in cold storage. Rates on BTC have since improved, but they are still lower than loaning U.S. dollars. Smith thinks this will improve.

A bigger change has been investors’ spreading their bitcoin among more exchanges and doing more due diligence on the exchanges. Smith thinks risk is being priced more realistically, and he thinks the industry overall is healthy.

Smith stressed that the experiences forming his views are based on his companies’ experiences and those of his customers.

The immediate reaction to the Bitfinex hack was for companies to pull money not needed to fund existing position hedges. This helped drive a decline in bitcoin’s price. While Smith did not believe there was a contagion risk, the best course of action was to act and watch how the situation developed.

Markets have since returned to normal. The spread between USD and BTC deposit rates has changed. Prior to the Bitfinex hack, one could get a 15 to 20% return on USD rates to finance margin positions. After Bitfinex, bitcoin deposits dropped by 1.5% to 2%.

Smith believes the industry has handled Bitfinex well and is currently healthy. Six months ago, had an exchange failed, there would have been headlines proclaiming the death of bitcoin. Now, due to the industry’s educating the media, the headlines are more measured.
Tags: news, bitcoin, opinion