LEO token is the native cryptocurrency of Bitfinex.
In this guide, we will be exploring its origin, utility, and potential bullish and bearish price catalysts.
Please keep in mind that this guide is not investment advice. Do your own research.
With that said, let’s dive right into it!
Origin of the LEO Token
Bitfinex raised a whopping $1 billion in capital in just 10 days, making the LEO token sale the largest initial exchange offering (IEO) of all time.
Unlike most other IEOs, the LEO sale was 100% funded in the private sale and investors received no discounts or “bonuses”. Nobody received any “free” LEO, not even Bitfinex itself.
According to Bitfinex CTO Paolo Ardoino, the amount was raised by a “legion of inside and outside users” who invested over $1 million each, as well as several industry giants and private companies that invested more than $100 million each.
The token sale came just weeks after it was reported that Bitfinex had lost $850 million, and had apparently used funds from Tether to cover it up.
However, it was later revealed that Bitfinex hadn’t actually lost the funds, but the money was instead frozen in accounts controlled by Crypto Capital.
The Bitfinex LEO token sale was created as a win-win solution to make up for the $850 million shortfalls in its accounts, giving the exchange a quick cash injection, while offering token holders a variety of benefits in return.
The LEO IEO was quickly able to recoup these lost funds, enabling the exchange to resume customer withdrawals and normal operations.
During the token sale, LEO tokens were priced at 1 USDT each, with exactly 1 billion LEO tokens sold. As of yet, it remains unclear exactly how many investors bought the Bitfinex tokens during the private sale.
Although there are currently about 1,200 LEO token holders, according to the Etherscan profile, that figure is not accurate given that many individuals are keeping their LEO on Bitfinex (which would count as 1 address on Etherscan).
Further, only 65% of the LEO token supply was issued on the Ethereum blockchain with the rest having been issued on the EOS blockchain.
That said, it is fair to assume that the bulk of the LEO token supply is concentrated in the hands of just a few individuals.
LEO Token Economics
As an exchange utility token, LEO is designed to benefit Bitfinex traders, allowing LEO token holders to get preferable rates and treatment when using the platform.
Trading for LEO opened on May 20, 2019, with Bitfinex adding BTC, USD, USDT, EOS and ETH trade pairs for the utility token. After initially entering the exchange at just over $1, LEO token immediately began its ascent, peaking at above $1.50 barely a week after it was first listed.
Part of the reason for its immediate growth can be attributed to the utility of the token, which is designed to both improve profitability for Bitfinex traders by reducing trading fees, inevitably making it desirable for high volume traders.
In addition, iFinex have also promised LEO holders further yet to be specified benefits on future iFinex platforms.
LEO Token burning
On a monthly basis, iFinex and its affiliates will use no less than 27% of the gross revenue from the previous month to purchase LEO tokens at the then market rate, reducing the circulating supply.
Beyond this, iFinex have also pledged to repurchase and burn tokens through three additional avenues:
- 95% of any funds recovered from Crypto Capital will be used to purchase and burn LEO tokens, with these repurchases being made within an 18 month period after recovering the funds.
- At least 80% of net funds recovered from the 2016 Bitfinex hack (totaling 119,756 BTC) will be used to repurchase and burn tokens, again within 18 months of the recovery date.
- iFinex may also burn LEO tokens that were used to pay trading fees on any of its platforms.
This will be done until there are no more LEO tokens in circulation, essentially driving up the rarity of these tokens over time, which could, in turn, lead to price growth.
Taker Fee Reduction
Arguably the main utility of the Bitfinex LEO token is the taker fee reduction it offers to holders. Anybody holding LEO tokens will be provided a 15% discount on their taker fees.
As of June 4th, 2019, Bitfinex also announced that holders of more than 5,000 USDT equivalent in LEO tokens will receive an additional 10% discount across crypto-crypto trading pairs on both Bifinex and Ethfinex.
Overall, this brings the maximum possible taker fee discount to 25% for those holding >5,000 USDT worth of LEO and trading crypto-crypto pairs.
Bitfinex Lending Fee reduction
P2P lenders will be provided a 0.05% fee discount for every 10,000 USDT worth of LEO tokens held in their account during the previous month. This discount is capped to a maximum of 5%, which in turn requires $1 million worth of LEO to be held by the lender.
iFinex also points out that this discount is subject to change, and may be altered in the future should the Bitfinex fee schedule change.
Fiat Deposit and Withdrawal Fee Reduction
Lastly, LEO holders will be provided an up to 25% discount on both deposit and withdrawal fees.
Beyond this, Bitfinex token holders, with an average balance of more than 50 million USDT in LEO will be able to withdraw $2 million in fiat per month without any fees.
If holders of >50 million+ USDT worth of LEO withdraw more than $2 million per month, this will be charged at a rate of 2%, rather than the current 3% for standard users. Again, iFinex mentions that these rates are subject to change.
LEO Token Price Catalysts
As always, at CoinDiligent we abstain from making price predictions because we don’t want to pretend to know where the price of an asset is headed.
Instead, this section will be focused on outlining some major bullish and bearish price catalysts that we have identified for the LEO token.
Bullish price catalysts
Many of the most respected investors and speculators in the cryptocurrency space, like @szzu, thinkingusd, etc are very bullish on LEO.
Below are some events that would likely have a bullish impact on the price of LEO:
- Growth of Bitfinex IEO platform
IEOs (Initial Exchange Offerings) have been referred to by many as the successor of ICOs. This trend was kickstarted by the IEO platform launched by Binance, and is now seeing adoption with other major exchanges, like Bittrex and OKeX, as well.
In response to the increasing popularity of this new way of raising funds, Bitfinex launched it’s own IEO platform: Tokinex.
There are rumors that Bitfinex could force projects using Tokinex to raise in LEO. This would create buy pressure for the token as investors purchase it from the open market to participate in IEOs on the Tokinex platform.
Further, if Tokinex follows a similar path to the Binance IEO platform, it could also require investors to hold a certain amount of LEO in their accounts to be eligible to participate in the first place, creating additional buy pressure.
- Recovery of stolen Bitcoin from hack
In August 2016, Bitfinex suffered a hack for 119,756 BTC, worth close to $1B at the time of writing. Bitfinex stated in the LEO whitepaper that if the funds were to be recovered, it would use up to 80% of them to market buy LEO over the course of 18 months.
This would certainly be a very bullish catalyst for the LEO price, however, how likely is that to happen?
That is hard to estimate, however, it may not be as unlikely as most think.
On June 7, 2019, there was a transaction for $1.5M out of the wallet where the stolen Bitcoin are stored, showing that the hacker is still active and might be willing to return them.
Further, the hacker might now even be incentivized to return the Bitcoin.
All the hacker would have to do is purchase a large amount of LEO tokens, and then return the stolen Bitcoins to Bitfinex.
Since the returned Bitcoins will be used to purchase LEO, it would be a profitable move for him that would additionally leave him immune to potential legal risk.
- Recovery of frozen funds from Crypto Capital
If the frozen funds from Crypto Capital were to be recovered by Bitfinex, 95% of the $850M would be used to buy LEO over a period of 18 months.
Similarly to recovering the Bitcoins from the 2016 hack, this would also be an enormously bullish event for LEO.
- Launch of Bitfinex derivatives exchange
Bitfinex is rumored to be launching its own cryptocurrency derivatives platform before the end of June 2019.
Currently, with a yearly trading volume of close to $1 Trillion, Bitcoin derivatives platform BitMEX is by far the most liquid cryptocurrency exchange.
If Bitfinex launched a similar platform, it is fair to assume that it is likely to capture a portion of that volume.
The increased volume would result in higher revenue for Bitfinex, out of which a portion is used to buy LEO, and also in increased demand from traders to reduce trading fees.
- Bitfinex gains market share
Bitfinex is currently the exchange with the most liquid Bitcoin to fiat trading pair.
However, the explosive growth of Binance has prevented Bitfinex from achieving a similar feat for many of the major altcoin pairs like Ethereum, Ripple, or Litecoin.
Binance’s aggressive focus on regulatory arbitration is what enabled it to attract so many traders. However, it seems like those days may be over.
After Binance’s recent announcement that they will be blocking US citizens from using Binance.com, Bitfinex could see interest from traders that are forced to leave Binance.
This could lead to a gain in market share by Bitfinex, which, in turn, increases the demand for LEO to reduce trading fees by traders and also Bitfinex’ revenue which is used to buy and burn LEO.
- Overall trading volume in the cryptocurrency space increases
Even if Bitfinex does not manage to gain a bigger percentage of the cryptocurrency volume pie, it may still see significant growth as the cryptocurrency space continues to grow.
Forex markets move around $1.8 Trillion in daily volume in the spot market. This is approximately larger by approximately a factor of 500x than the current “real” volume in crypto markets, as estimated by Messari.
While it is impossible to say how much of that volume the cryptocurrency space will be able to match, it is fair to assume that there is still large growth potential from where volumes currently are.
Naturally, if Bitfinex manages to capture a portion of that growing volume, there will likely be increased demand for LEO as major traders purchase the token to reduce fees.
Bearish price catalysts
With the bull cases in mind, it is important to also explore the events that could potentially have a negative effect on the LEO Token price.
- Bitfinex gets shut down by regulators
Bitfinex has had numerous clashes with regulators in the US. If the exchange were to be shut-down by the authorities, that would most likely strip the LEO token of all of its value.
However, although the downside would be devastating in this scenario, it does not seem to be very likely since most aspects of the Bitfinex trading platform does not infringe with US regulations.
Bitfinex has highly sophisticated KYC/AML process, does not allow US citizens to purchase LEO Tokens and has a much more selective process for listing new coins than exchanges like Binance.
- NYAG Confiscates Funds from Crypto Capital
If the New York Attorney General were to confiscate the $850 million in frozen funds of Crypto Capital, that means they would not be used to repurchase LEO from the open market.
While it isn’t a very bearish factor per se, it would indeed reduce the potential buy pressure that LEO could have.
- *If* LEO buyback can be front-run
Theoretically, if it was possible to front-run the LEO buyback by buying right before the buyback, and selling immediately after the burn is complete, the price increase generated would be fully absorbed by high-frequency traders.
However, this is a very well known problem that Bitfinex will likely be addressing before it starts buying back tokens.
LEO Token Controversy
The controversy surrounding Bitfinex, Tether and the apparent $850 million dollar loan was all over the headlines in the weeks just prior to the Bitfinex token sale, and for good reason.
The suspected misappropriation of these funds has had far-reaching consequences that essentially stifled Bitfinex’s trustworthiness in the public eye.
This comes despite the fact that many exchanges, as well as both institutional and individuals traders have to come to rely on Tether (USDT) as a base cryptocurrency.
Doubts regarding the solvency of Tether have existed since practically day one, with many questioning whether or not the supposed USD-backed stablecoin was actually backed with sufficient funds.
This scrutiny was quelled slightly after law firm Freeh Sporkin & Sullivan LLP released an unofficial report back in June 2018 verifying that Tether Limited was not operating using a fractional reserve, and did in fact have the capital to back its stablecoin.
On the other hand, Bitfinex has also run into legal troubles with The New York State Attorney General (NYSAG) after it was claimed that many New York-based traders were actively trading on the platform despite there being a licensing prohibition.
Prior to this, Bitfinex made an announcement and clarified its terms of service, stating that since it does not comply with New York Codes, Rules and Regulations it will no longer be offering its platform to the state’s citizens.
Shortly after, the exchange made the decision to not apply for a New York Bitlicense, essentially barring it from offering it services in New York until it obtains one.
Despite this, the NYSAG is currently suing Bitfinex, arguing that it has reason to believe New York traders are still using the platform while claiming that Bitfinex could be insolvent.
Questions Surrounding the Bitfinex token
In light of these events, the popular opinion regarding the newly launched LEO token is decisively negative.
Many have raised their doubts that a company going through so much legal turmoil was able to raise 1 billion USDT in both soft and hard commitments in less than two weeks time.
Additionally, despite initial negativity surrounding the prospects and utility of the token, LEO has seen significant growth since its launch, generating an excellent ROI for its investors.
Because of this, some have speculated that Bitfinex may be performing a form of an indirect public sale, offloading LEO on unsuspecting traders using public markets.
All in all, it is clear that Bitfinex’s legal woes in the US are not going to disappear anytime soon. Whether or not there will be a negative spillover effect on either Tether or LEO remains to be seen.
Similar crypto assets to LEO
Although the Bitfinex’s LEO might be the most recent token to offer perks at a cryptocurrency exchange, it is by no means the only one available. Several other cryptocurrency exchange platforms have already beat Bitfinex to the punch, offering a similar exchange utility token of their own.
If you are looking to spread your investment over several different cryptocurrencies in the same class, then these are the ones to keep an eye on;
BNB Token – Binance
Arguably the most well-known exchange token, Binance Coin (BNB) is widely regarded as the first major utility token for exchanges.
Like LEO, the primary utility of BNB is a fee reduction for holders. As it stands, Binance users are provided a 25% reduction when paying their trading fees with BNB. This discount will be reduced to 12.5% in July 2019.
However, since its original launch, Binance has devised several new benefits for BNB token holders, including increasing the odds of successful participation in Binance Launchpad projects, and a pivotal role on the Binance DEX.
Binance Coin originally ran on the Ethereum blockchain as an ERC20 token, however, as of April 2019, BNB now runs on its native blockchain — Binance Chain.
Beyond its myriad functions, Binance Coin (BNB) was also one of the biggest gainers throughout the 2018 bear market.
HBT Token – Huobi
Huobi Token (HT) is the native utility token for Huobi, currently among the top 10 largest cryptocurrency exchange platforms.
HT can be used to purchase VIP membership on the exchange, providing an up to 50% fee discount, and token holders will get early access to new features and private events.
Huobi also allows HT holders to use their tokens to vote on which tokens they want to be listed on the Huobi Autonomous Digital Asset eXchange (HADAX).
Huobi tokens were not technically sold in an ICO, instead of being given out to Huobi users who purchased Huobi Point Cards, which are essentially prepaid fee packages. Users purchasing point cards were given Huobi Tokens as an added incentive.
Each quarter, 20% of the profits generated by Huobi Pro will be used to buy back Huobi Tokens at the market rate, these tokens will then be used to protect user funds should the platform ever be compromised.
At the lowest rate, the 1,000 Point Card Package cost 990 USDT, and provided 1,000 free Huobi Tokens. At the current value, these “free” tokens would not be worth over 3,000 USDT.
OKB Token – OKEx
OKEx is currently one of the largest cryptocurrency exchange platforms in operation and regularly finds itself in the top five exchanges by trade volume.
The most recent entry to this list, OKB token was first launched back in June 2018, with the tokens being freely distributed users of the OKEx exchange through its loyalty program. Out of the total supply of 1 billion tokens, 60% will be distributed to OKEx customers, with the rest being reserved for investors and developers.
50% of the service fees collected by the OKEx exchange will be shared between OKB token holders every Friday, and OKEx users will have the opportunity to pay their trading fees in OKB with a discount.
Beyond this, OKB holders will also have the opportunity to vote for which projects are listed on the exchange, and will soon be able to use their OKB tokens to participate in token pre-sales, similar to how BNB is used for the Binance Launchpad.