The upcoming Bitfinex IEO is something that is being discussed all around the cryptocurrency space. It is quite surprising that the Bitfinex IEO is happening just a few days after the New York attorney general announced that they were taking action against iFinex, who owns both Tether and Bitfinex.
Tether and Bitfinex: The Same Entity
Tether and Bitfinex are largely the same entity. It is worth remembering of course that they lied and said that they were not connected before we had the whistleblower leak called the Panama Papers, which actually revealed their lie and that the audits have never been delivered despite being promised. In an industry in which we are striving so hard for transparency, Tether and Bitfinex have done everything possible to be opaque at every opportunity that they can get.
The Issue of $850:
It seems that Bitfinex has misplaced $850 million in corporate and customer fund which has resulted in some rather fancy accounting work which essentially saw an equal amount of Tether underlying dollars used by Bitfinex to cover that loss of $850 million with Bitfinex putting up shares in the company as collateral resulting in Tether only being 74% backed. Bitfinex of course casually forgot to mention all of this to investors or the holders of Tether that Bitfinex had $850 million seized.
The 2016 Bitfinex Hack:
Back in 2016, Bitfinex got hacked for 120,000 bitcoin which at that time was worth about $72 million and the losses were spread to users who experienced a generalized loss of 36%. They enforced a bail-in on exchange users and took 36% of account holders funds and the users were given a Bitfinex token in place of their stolen funds. The BFX token was redeemable for shares in Bitfinex. However, the cryptocurrency market was quite different and small at that time with the total market cap of $12 billion (at the time of hack). So, Bitfinex being hit $72 million or 120,000 bitcoins was pretty big because Bitfinex was the king of cryptocurrency exchanges back then, which now stands at #49.
The Bitfinex IEO:
Bitfinex is looking to raise $1 billion from big money investors. Each token that they are putting up is going to be worth $1 purchasable with Tether. The token will be called LEO and will be a utility token. According to documents LEO token holders will enjoy reduced crypto to crypto trading fees on Bitfinex and the companies decentralized exchange EOSfinex. Moreover, the token will also reportedly grant decreased lending fee, reduction withdrawal, and deposit fee, discounts and derivatives fees reductions.
Bitfinex has announced that $600 million is already taken in terms of allocation by private investors and the rest $400 million will be available for retail investors on May 10th.
If Bitfinex and Tether fail, How will it affect the price of Bitcoin?
If somehow BItfinex and Tether crumble due to the New York attorney general taking action against the company, bitcoin price might be affected at all with only Bitfinex crumbling especially at the current stage in the cryptocurrency game where Bitfinex stands at the 49th position in the top crypto exchanges list. However, if Tether fails, that could be potentially disastrous of a Mt.Gox level proportion if it happens overnight.
Competitors, of course, are scrambling to get bigger and bigger by the day trying to get people over to their services and people are already moving into those alternatives. Every time that happens, the impact of a Tether collapse becomes less and less relevant. However, there is a massive exposure to Tether across the markets with most major cryptocurrency exchanges having massive volumes in Tether pairs and much lower volumes in other stablecoin pairs.
What are your thoughts on the upcoming Bitfinex IEO? Let us know in the comments section below.