As earlier revealed by Chinese cryptocurrency billionaire, Zhao Dong that Bitfinex has the intention of launching an initial exchange offering (IEO), the exchange is now working towards launching a $1 Billion IEO, a move coming shortly after the widespread allegation that Bitfnex used Tether (USDT) for illegal cover-up.
While some are defending the $1 billion IEO, the co-founder of Fundstrat Global Advisors LLC, Tom Lee, believes the idea is not in the interest of Bitcoin (BTC) and the entire cryptocurrency market.
Lee, despite been a bullish supporter of Bitcoin, sees a short term negative implication of the $1 billion IEO on Bitcoin.
The analyst, who has been saying the crypto bull run has resumed, said: “$1 billion IEO is a lot of “new” token supply and probably has a short-term negative impact on $BTC #bitcoin and other crypto as the market needs to absorb this supply.”
Lee argued that his assertion may not hold only if “all the purchasers of the IEO” are newbies of the crypto space, indicating they bought the crypto through fiat.
He pointed: “Miners sell $7mm per day so a $1 billion IEO is essentially 142 days worth of miner selling taking place in one day.”
A Look into Bitfinex Initial Exchange Offering (IEO)
The Bitfinex IEO is is creating pandemonium in the crypto community. The IEO, according to The Block, is meant to raise $1 billion. The Bitfinex exchange token is to be referred to as LEO. It will first be offered to private investors, afterwards, it will be opened to the public on May 10.
Dong said Bitfinex has already raised $600 million from private investors. The IEO, as contained in its whitepaper, is to be used to cover the frozen $850 million.
While Bitfinex is using legal procedures to unfreeze the fund, the exchange says it is confident it will retrieve the funds.
Bitfinex exchange got a date with trouble a couple of days ago after New York State’s Attorney General, Letitia James, revealed that iFinex, the principal company in control of Bitfinex exchange, is breaching the State’s law.
Bitfinex exchange was accused of masking a sum of $850 million loss with USDT. The accusation was countered by Bitfinex in quick succession, but this was a bit late to restrain the subsequent damage as panicking investors transferred their digital currencies in large volume.
The disclosure by NYSAG left an obvious negative impact on Bitfinex as over $89 million worth of Bitcoin (BTC) and $650,000+ ETH got moved from the exchange in the middle of the incident.
All the digital currencies in the crypto sphere felt the side effect of the occurrence as majority of top cryptocurrencies experienced plummet in market price.