06 Mai 2019

iFinex possible IEO: Daily Market Commentary May 6, 2019

Patrick Heusser

Patrick Heusser

Senior Trader bei Crypto Broker AG

Über den Autor

The Bitfinex/Tether topic remains the „hot“ topic in the crypto community. The focus is now on the planned IEO (LEO token) from iFinex (the parent company of Bitfinex and Tether) on the Bitfinex exchange platform.

Last week some rumours hit crypto twitter with a possible IEO, which is intended to close the funding gap (or hole) that the Bitfinex exchange is left with after its third party payment processing partner „screwed up“ or ran with the money.

There is not much information available, but this is what we were able to find:

– Currently, the IEO is in the pre-sale phase. Institutional investors can commit to tickets no smaller than USDT 1 million – If there is anything left to fill up to the USDT 1 billion cap that will be conducted through an IEO on the Bitfinex platform for retail investors. You cannot participate with Fiat USD; you need to get USDT first to subscribe or buy LEO tokens.

– 25% discount on trading fees

– Small discount on borrow/lending fees

– Withdrawl/deposit fee reduction if you hold more than USDT 50 million

– When the $850 million of the frozen funds are released back to Bitfinex, they will use 95% of the funds to buy back (burn) LEO tokens

– If they get any BTCs back from the 2016 hack (120k BTC in total), they will use 80% of the proceeds to buy back (burn) LEO tokens

– 27% of Bitfinex’s gross revenue will be used to buy back (burn) LEO tokens on a monthly basis

Here are the screenshots of the private sale document:

Judging by the crypto community’s comments on twitter, we think most people are getting it wrong. I hear a lot of comments that the LEO token is more attractive than the BNB token and therefore should attract inflows. Others are arguing that hedge funds will have fun arbitraging those two tokens against each other for their embedded discount models.

The bottom line is that those people did not understand that the biggest difference between the two tokens is the underlying issuer credit risk from iFinex and Binance. All other variables are negligibly small. Before you even analyse these small differences between the LEO and BNB token, ask yourself the following questions before you invest into the following setup:

Would you…
– invest in a company with a liquidity shortfall of $850 million with little to no outlook of getting it back anytime soon
– invest in a company that is under heavy regulatory scrutiny and in an onging court case, where the outcome is absolutely unforeseeable
– invest in a company being forced to use another derivative (USDT), which does not increase the credit risk but adds another variable that can easily move against you with no upside potential
– invest in a company that has no stable banking relationship

And as a sidenote – the entire LEO token pre-sale push seems to come from a big shareholder of Bitfinex (Zhao Dong). There was no official announcement from iFinex or Bitfinex regarding this LEO token sale.

Now, tell me again that this is a good investment!