Bitfinex is facing a new set of insolvency rumours
It's a stretch to assume insolvency, but there's definitely something fishy happening right now.
A new set of rumours holds that Bitfinex's banking arrangements might be up in the air again.
Consider these before and after pictures.
Before – 29 January 2019
After – 30 January 2019
What am I looking at?
These are pictures from the CryptoCapital website. As far as anyone knows it's the company that's most recently been helping handle Bitfinex's banking arrangements as an intermediary.
Consider the other four exchanges.
- QuadrigaCX: The exchange went down following the alleged death of the CEO and the loss of banking arrangements.
- Coinapult: The exchange "temporarily" stopped trading on 10 December, and hasn't started since. And it last tweeted in May 2017.
- Exmo: Still seems to be up and running, although relatively little-used.
- Cex.io: Still seems to be up and running, although it's been having a slew of withdrawal problems lately, which started the same day Quadriga went down.
It's a somewhat troubled bunch.
The strangest part might be that CryptoCapital removed Bitfinex from its pages now of all times, right when CryptoMedication published an article claiming that CryptoCapital and by extension Bitfinex are insolvent.
It's a stretch to say that all four of those exchanges are definitely insolvent (although some might be). It's a further stretch to say that those exchanges' problems mean CryptoCapital is insolvent, and from there it's an even bigger stretch to say that Bitfinex is insolvent. In fact, we know it isn't in crypto dollars because we can see its wallet balances (a few hundred million here, a couple hundred mil there and so on).
But why, then, did CryptoCapital scrub Bitfinex from its site so abruptly? It probably wasn't routine maintenance given that the long-defunct Coinapult is still there.
Plus, a look at bitcoin price differences across these exchanges also suggests that they have something common tying them together, and that there is something going on behind the scenes. About 17 hours ago at the time of writing, the author pointed out that bitcoin prices were trending higher on Bitfinex, Cex.io and Exmo.
The same trend has only been accentuated since then, and you now have almost a $100 bitcoin premium on those three exchanges which all just happen to be tied together by the same fiat money intermediary.
This is a sign of fiat money withdrawal difficulties, suggesting bank troubles.
Basically, when you can't cash out in USD or other fiat currency you have to convert it to cryptocurrency first, and bitcoin is the most popular choice for this. So demand for bitcoin rises on exchanges whenever fiat money withdrawals get disabled. This pushes bitcoin prices upwards on individual exchanges.
That's most likely what's happening here, and it's beyond coincidence that it would be simultaneously happening to three exchanges which are connected only by CryptoCapital. It seems clear that even if it might not be insolvent, Bitfinex is definitely having some issues processing payments right now. This might not bode well for Tether, which depends on its fiat money backing.
The scope of the issue, as measured by price differences across exchanges, seems to be growing right now. It may be worth keeping an eye on.
Disclosure: At the time of writing the author holds ETH.