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Whilst Bitfinex itself may not be a key player, arguably the Tether Stablecoin, which it controls , is. From Coinmarketcap, Tether volumes are regularly second

Whilst Bitfinex itself may not be a key player, arguably the Tether Stablecoin, which it controls , is. From Coinmarketcap, Tether volumes are regularly second only to Bitcoin's , and many exchanges who have difficulty getting fiat banking arrangements, make use of it, to get funds into an out of their exchanges. Loss of Tether would be a very serious blow to those exchanges. So what's the risk? Well Tether's original proposition was that it was 1:1 backed with actual US dollars held in specific isolated accounts. What we know now is that they "lent" $850 million to Bitfinex, to cover for funds that Bitfinex no longer has access to as their banking partner (crypto capital) has taken those funds and not delivered them to the appropriate customers. There is now the risk that iFinex (who control both Bitfinex and Tether) could be technically insolvent, unless they can somehow cover that loss, or get their frozen/missing funds back...

jpmattia 7y ago
> There is now the risk that iFinex (who control both Bitfinex and Tether) could be technically insolvent There seems to be a sizable amount of confusion about the difference between insolvency and illiquidity in the tether-watching community. The fact that they loaned out funds to Bitfinex means that their balance sheet is fine (they are solvent), but if everyone redeemed their tether tomorrow, they would have to delay the payout, which is a liquidity issue. In short: Liquidity issues are solved by capital injections (loans or equity sales, much like the BFX LEO), but solvency issues are not.
- rtempaccount1 7y ago
  That seems to assume that Bitfinex can repay them, which is in no way clear. If Bitfinex can't cover the loss, they're insolvent. If everyone redeemed their Tether, it's not a delay it's "you're not getting all of your money back" As Bitfinex's finances are far from transparent, it's not clear if they're insolvent or not...
- dwighttk 7y ago
  In a bubble lots of people say “it is just a liquidity issue” till it pops.
- wgjordan 7y ago
  I don't think there is any confusion on definitions of insolvency, there just seems to be disagreement on whether there is any risk iFinex can get their frozen/missing funds back at all, not how long it will take to collect them.
lallysingh 7y ago
So... What does that have to do with Bitcoin?

jpmattia 7y ago

> There is now the risk that iFinex (who control both Bitfinex and Tether) could be technically insolvent There seems to be a sizable amount of confusion about the difference between insolvency and illiquidity in the tether-watching community. The fact that they loaned out funds to Bitfinex means that their balance sheet is fine (they are solvent), but if everyone redeemed their tether tomorrow, they would have to delay the payout, which is a liquidity issue. In short: Liquidity issues are solved by capital injections (loans or equity sales, much like the BFX LEO), but solvency issues are not.

rtempaccount1 7y ago
That seems to assume that Bitfinex can repay them, which is in no way clear. If Bitfinex can't cover the loss, they're insolvent. If everyone redeemed their Tether, it's not a delay it's "you're not getting all of your money back" As Bitfinex's finances are far from transparent, it's not clear if they're insolvent or not...
dwighttk 7y ago
In a bubble lots of people say “it is just a liquidity issue” till it pops.
wgjordan 7y ago
I don't think there is any confusion on definitions of insolvency, there just seems to be disagreement on whether there is any risk iFinex can get their frozen/missing funds back at all, not how long it will take to collect them.

lallysingh 7y ago

So... What does that have to do with Bitcoin?