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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 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...

> 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.

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...

In a bubble lots of people say “it is just a liquidity issue” till it pops.

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.

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

> The era of the single exchange is gone. Bitfinex is a key player but there is no player holding the whole market. There is also an active off-line trading market.

You could have said the same for LTCM and government had to bail the market out!

> The last one created, literally, billions of value for the holders.

What it literally created was billions of vapor for the holders because ~100% of that “value” was entirely make-belief.

In no doubt are consumers expectations of cryptocurrency market adoption wildly over speculated but make believe? People who invest is cryptocurrencies are in essence shorting the current global financial system.

Short:

sell (stocks or other securities or commodities) in advance of acquiring them, with the aim of making a profit when the price falls.

——

In what way exactly is bitcoin helping to “short global financial system”?

Widespread "belief" in currencies other than those tied to national institutions leads to weakening of the nation state and therefore the current global financial system.

https://news.ycombinator.com/item?id=19896697

And yeah. No amount of belief can make bitcoin into a viable currency.

I wasn't referring to bitcoin in particular.

https://www.forbes.com/sites/billybambrough/2019/05/15/a-u-s...

A cheap long shot that will pay out in the event of a gradual shift in attitudes.

I know you might find it hard to believe, but some of us actually pay for stuff in crypto

“Some” does not equal “billions in value”. Spending the energy equivalent of several countries on transaction power equivalent of a medieval lender is not billions in value.

That's true of all currencies. It's just a shared delusion that the coin or paper has any value. That in itself has value, as otherwise you left with bartering with specific goods that have value to the person you're trading with - a significantly less liquid market than the one featuring the shared delusion.

In that sense, there's nothing special about bitcoin. It's just another shared delusion, just with fewer believers. As long as there are believers, there is value. The stronger the belief, the greater the value.

Currencies, for all their make belief, have rather tangible benefits that do end up having and creating value.

What value beyond speculation does bitcoin have?