It is now official, Bitfinex, the cryptocurrency exchange which has had its share of controversy, especially considering all the recent development surrounding Tether, will conduct an Initial Exchange Offering (IEO). Bitfinex’s token which has been dubbed LEO, will first be offered to private investors, then subsequently opened to the public after May 10 if there is any allocation left, according to information shared by shareholder Zhao Dong. The Block has also reported, citing Zhao Dong, that Bitfinex has already raised $600 million in private, verbal commitments.
As per the white paper, the firm says it is issuing the tokens to cover the $850 million currently frozen in several accounts controlled by the payment processing company Crypto Capital.
So, there you have it, the market lives on and one can only imagine where the price of Bitcoin would be if Bitfinex did not go out of its way to obtain those funds last year. Now, there is something to mull over about this unofficial bailout and that is, what impact did it have on the underlying price action of crypto markets. In other words, was it this transaction which is being questioned by the New York State Attorney General (NYAG) that subsequently helped the markets to bottom out? In which case, irrespective of other positive developments that have taken place since, the underlying health of the market ought to be reassessed.
At the same time, unlike previous events surrounding Tether, the market is no longer solely dominated by crypto maximalists and evangelists, alongside pump and dump groups; there are a number of high profile “institutional” level players that are bringing many years of professional trading experience to the table. As such, one-sided flow is now very rate and this also means that FUD alerts may no longer be as effective in propping up prices of faltering assets. This is not to say that Bitcoin should fall back down to 2018 lows but a healthier pull back than the one that took place upon the initial release of the news by the WSJ may add some credibility to a market that is in desperate need of good PR!
Elsewhere, it is worth pointing out that the market has been undergoing a period of decoupling. The high positive correlation between Bitcoin and Ethereum, as well as other assets, is no longer at extreme levels of 0.9 or more, but is now in the region of 0.7 and 0.8. While even at these levels, the correlation is still seen as very strong, the pace of decoupling may lead to even more fragmentation in the market, especially given the uncertainty surrounding Tether and the difficulty in placing credit risk on exchanges that operate with the aforementioned stablecoin.
Finally, we’d like to leave you with a quote from Neil Gaiman (American Gods) - I can believe in Santa Claus and the Easter Bunny and the Beatles and Marilyn Monroe and Elvis and Mister Ed. Listen - I believe that people are perfectible, that knowledge is infinite, that the world is run by secret banking cartels and is visited by aliens on a regular basis, nice ones that look like wrinkled lemurs and bad ones who mutilate cattle and want our water and our women.
Thank you for reading,
The BeQuant’s Analytics team