<p>Nobody knows whether Bitfinex is insolvent or not. As a result, dollars at Bitfinex are worth less than dollars at other exchanges. This accounts for the price difference you see. To exploit this difference, you would have to send dollars to Bitfinex and command them to make what appear to be fraudulent transfers on your behalf.</p>
<p>See <a href="https://steemit.com/bitcoin/@joelkatz/bitfinex-do-not-deposit-any-funds" rel="nofollow noreferrer">this article</a> for more details. Some excerpts:</p>
<blockquote>
<p>Bitfinex has imposed a haircut on all of their depositors.</p>
<p>For those whose deposits were not held in segregated accounts, there is no question that the deposits constituted general obligations, payable on demand, on the part of Bitfinex. To justify making anything less than a full payment on a general obligation that is payable on demand, a company would have to be insolvent or illiquid.</p>
<p>By definition, if you don't have sufficient assets to make the payments you are obligated to make, you are insolvent. There's no reason to think Bitfinex has assets that are not liquid. They imposed a haircut because they don't have assets to cover the funds their depositors have every right to demand from them. They are insolvent.</p>
<p>When you deposit funds at Bitfinex, they have your funds. You have a promise that they will repay you the funds you deposited. But you're just another creditor on their list of creditors. You get funds if they have them and not if they don't. Your deposit is another general obligation of Bitfinex, a company that is insolvent.</p>
</blockquote>
<p>An insolvent company cannot make full payment to a junior creditor without court approval (or consent of all their creditors) -- such a transfer would be fraudulent. We know Bitfinex has not gone to court as they would have to have given notice. When you deposit money at Bitfinex, you become a junior creditor. When you command a trade or withdrawal, you are commanding full repayment of yourself, that is, you are ordering them to make a fraudulent transfer on your behalf.</p>
<p>Fraudulent transfers are subject to clawback. That is, if you trade at Bitfinex, you may eventually <a href="https://bernsteinlaw.com/publications-list/investor-beware-what-everyone-should-know-about-clawback-litigation/" rel="nofollow noreferrer">get a letter from a trustee or receiver</a> demanding you repay the money you made or even the full value of the assets you withdrew.</p>

CC BY-SA 3.0
2017-02-08T17:58:02.413Z
But at kraken.com xbt/usd is 1057.58 and Bitfinex rate is 963.41, similar to Gdax 967.42. Any problem with kraken too?
Juan Ignacio Pérez Sacristán
CC BY-SA 3.0
2017-02-08T17:59:44.223Z
Kraken is fine. That's why the rate at Kraken reflects the rate at other reliable exchanges. Bitfinex is (was) the outlier. When you see a rate at an exchange that's far out of whack, something is almost certainly wrong with that exchange. (If you don't know why it's out of whack, trading to exploit that difference is very risky.)
David Schwartz
CC BY-SA 3.0
2017-12-23T20:19:12.617Z
So, are you saying that Bitfinex is fraudulent? What makes you say that other exchanges are not?
marcolopes
CC BY-SA 3.0
2017-12-27T19:30:40.143Z
I'm not saying Bitfinex is fraudulent, just that there happened to be an incident at that time that caused people to value money at that exchange differently.
David Schwartz
CC BY-SA 3.0
2017-02-08T17:44:48.003Z
2017-02-08T18:03:49.743Z
2020-06-16T11:10:03.350Z
David Schwartz
<p>I've just found the concept for this practice and wanted to share:</p>

<p><a href="https://en.wikipedia.org/wiki/Arbitrage" rel="nofollow noreferrer">https://en.wikipedia.org/wiki/Arbitrage</a></p>

<p>In economics and finance, <strong>arbitrage</strong> is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices.</p>

CC BY-SA 3.0
2017-02-09T14:57:42.707Z
Interesting... https://www.cryptocoincharts.info/arbitrage
Juan Ignacio Pérez Sacristán
CC BY-SA 3.0
2017-02-08T18:15:53.143Z
2017-02-08T18:15:53.143Z
Juan Ignacio Pérez Sacristán
<p>Bitstamp exchange price for Bitcoin is right now 1056.07 USD</p>

<p><a href="https://bitcoinaverage.com/en/exchanges/bitstamp/btc-to-usd" rel="nofollow noreferrer">https://bitcoinaverage.com/en/exchanges/bitstamp/btc-to-usd</a></p>

<p>while Bitfinex is 963.41 USD</p>

<p><a href="https://bitcoinaverage.com/en/exchanges/bitfinex/btc-to-usd" rel="nofollow noreferrer">https://bitcoinaverage.com/en/exchanges/bitfinex/btc-to-usd</a></p>

<p>Is it possible to exploit such a big difference to extract value? Probably this is a well known strategy on markets, but my finance knowledge is quite limited.</p>

<p>Is there any bot doing that kind of operations without human intervention? Thx!</p>

<p>Refs.:</p>

<p><a href="https://bitcoin.stackexchange.com/questions/48233/bitcoin-trading-at-bitstamp">Bitcoin trading at bitstamp</a></p>

<p><a href="https://bitcoin.stackexchange.com/questions/9551/how-does-one-make-money-from-bitcoin-trading">How Does One Make Money from Bitcoin Trading?</a></p>

<p><a href="https://bitcoin.stackexchange.com/questions/16917/need-help-understanding-how-to-profit-from-bitcoin-trading-like-forex">Need help understanding how to profit from bitcoin trading (like forex?)</a></p>

<p><a href="https://bitcoin.stackexchange.com/questions/3614/is-there-a-forum-like-exchange-for-trading-bitcoins-person-to-person">Is there a forum-like exchange for trading Bitcoins person-to-person?</a></p>

<p><a href="http://en.wikipedia.org/wiki/Order_book_%28trading%29" rel="nofollow noreferrer">http://en.wikipedia.org/wiki/Order_book_%28trading%29</a></p>

<exchanges><trading><buy-bitcoins><bitstamp><bots>
Bitcoin cross trading from Bitstamp to Bitfinex
Juan Ignacio Pérez Sacristán
# Bitcoin cross trading from Bitstamp to Bitfinex

(Asked by: username_0 on 2017-02-08)

Bitstamp exchange price for Bitcoin is right now 1056.07 USD

<https://bitcoinaverage.com/en/exchanges/bitstamp/btc-to-usd>

while Bitfinex is 963.41 USD

<https://bitcoinaverage.com/en/exchanges/bitfinex/btc-to-usd>

Is it possible to exploit such a big difference to extract value? Probably this is a well known strategy on markets, but my finance knowledge is quite limited.

Is there any bot doing that kind of operations without human intervention? Thx!

Refs.:

[Bitcoin trading at bitstamp](https://bitcoin.stackexchange.com/questions/48233/bitcoin-trading-at-bitstamp)

[How Does One Make Money from Bitcoin Trading?](https://bitcoin.stackexchange.com/questions/9551/how-does-one-make-money-from-bitcoin-trading)

[Need help understanding how to profit from bitcoin trading (like forex?)](https://bitcoin.stackexchange.com/questions/16917/need-help-understanding-how-to-profit-from-bitcoin-trading-like-forex)

[Is there a forum-like exchange for trading Bitcoins person-to-person?](https://bitcoin.stackexchange.com/questions/3614/is-there-a-forum-like-exchange-for-trading-bitcoins-person-to-person)

<http://en.wikipedia.org/wiki/Order_book_%28trading%29>

**Tags:** exchanges, trading, buy-bitcoins, bitstamp, bots


---

## 2 answers

### Answer by username_1 on 2017-02-08. Score: 1 | Accepted answer

Nobody knows whether Bitfinex is insolvent or not. As a result, dollars at Bitfinex are worth less than dollars at other exchanges. This accounts for the price difference you see. To exploit this difference, you would have to send dollars to Bitfinex and command them to make what appear to be fraudulent transfers on your behalf.

See [this article](https://steemit.com/bitcoin/@joelkatz/bitfinex-do-not-deposit-any-funds) for more details. Some excerpts:

> Bitfinex has imposed a haircut on all of their depositors.
>
> For those whose deposits were not held in segregated accounts, there is no question that the deposits constituted general obligations, payable on demand, on the part of Bitfinex. To justify making anything less than a full payment on a general obligation that is payable on demand, a company would have to be insolvent or illiquid.
>
> By definition, if you don't have sufficient assets to make the payments you are obligated to make, you are insolvent. There's no reason to think Bitfinex has assets that are not liquid. They imposed a haircut because they don't have assets to cover the funds their depositors have every right to demand from them. They are insolvent.
>
> When you deposit funds at Bitfinex, they have your funds. You have a promise that they will repay you the funds you deposited. But you're just another creditor on their list of creditors. You get funds if they have them and not if they don't. Your deposit is another general obligation of Bitfinex, a company that is insolvent.

An insolvent company cannot make full payment to a junior creditor without court approval (or consent of all their creditors) -- such a transfer would be fraudulent. We know Bitfinex has not gone to court as they would have to have given notice. When you deposit money at Bitfinex, you become a junior creditor. When you command a trade or withdrawal, you are commanding full repayment of yourself, that is, you are ordering them to make a fraudulent transfer on your behalf.

Fraudulent transfers are subject to clawback. That is, if you trade at Bitfinex, you may eventually [get a letter from a trustee or receiver](https://bernsteinlaw.com/publications-list/investor-beware-what-everyone-should-know-about-clawback-litigation/) demanding you repay the money you made or even the full value of the assets you withdrew.

> **Comments:**
> **username_0**: But at kraken.com xbt/usd is 1057.58 and Bitfinex rate is 963.41, similar to Gdax 967.42. Any problem with kraken too?  
> **username_1**: Kraken is fine. That's why the rate at Kraken reflects the rate at other reliable exchanges. Bitfinex is (was) the outlier. When you see a rate at an exchange that's far out of whack, something is almost certainly wrong with that exchange. (If you don't know why it's out of whack, trading to exploit that difference is very risky.)  
> **username_2**: So, are you saying that Bitfinex is fraudulent? What makes you say that other exchanges are not?  
> **username_1**: I'm not saying Bitfinex is fraudulent, just that there happened to be an incident at that time that caused people to value money at that exchange differently.  

---

### Answer by username_0 on 2017-02-08. Score: 1

I've just found the concept for this practice and wanted to share:

<https://en.wikipedia.org/wiki/Arbitrage>

In economics and finance, **arbitrage** is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices.

> **Comments:**
> **username_0**: Interesting... https://www.cryptocoincharts.info/arbitrage  

---

