Time and time again, a major ascendance by Bitcoin [BTC] has got industry speculators mulling the next roadblock for the king coin. The top cryptocurrency’s recent $5,800 price rally coupled with the recent Bitfinex announcement has resulted in just that.

Bitfinex, the controversy-riddled cryptocurrency exchange, announced on May 4, the launch of an initial exchange offering [IEO] to recover funds for the $850 million undisclosed loss. The exchange will table their LEO tokens and will look to reel in a whopping $1 billion in token sales.

With a substantial expected sale in the offing, some analysts suggest LEO could adversely impact Bitcoin, albeit temporarily. Thomas Lee, the head of research at Fundstray Global advisors is of this opinion, and questions the ability of the market to “absorb” these new tokens.

Lee, in a May 4 tweet, stated that the new “token supply” of Bitfinex’s LEO will have an unwarranted adverse short-term impact on Bitcoin as well other cryptocurrencies. The aforementioned comment was made in the sense of a crypto-to-crypto transaction, leading to several cryptocurrencies being exchanged for a presumable savior token, in LEO, with no long-term aspirations.

His tweet read,

“$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…

…Unless all the purchasers of the IEO come are new to crypto (fiat to crypto), which makes less sense.”

The market cap will see a brief dip to the tune of $1 billion, if all the transactions are purely in cryptocurrencies. Lee added that if this new “supply” is being propelled by “new customers,” referring to fiat to crypto and not nascent investors, the supply shock would not manifest.

Although, he claimed the latter scenario to be unlikely and made “less sense.”

On the topic of mining, Lee opined that the $1 billion expected gains from Bitfinex’s LEO token would equate to a significant selling by the miners. He added,

“Miners sell $7mm per day so a $1 billion IEO is essentially 142 days worth of miner selling taking place in one day.”

Despite the Bitfinex token sale and their prospects for the funds retrieved, Lee remains bullish in the long term. The Fundstrat executive recently stated that Bitcoin’s and the larger market’s sustenance during the Bitfinex-Tether fiasco is a sign that the crypto winter had subsided, adding that if a similar scenario played out in mid-to-late 2018, the market would be riddled in “panic liquidations.”

The post Bitcoin [BTC]: Bitfinex IEO token supply will negatively affect King Coin in the short term, Fundstrat’s Lee appeared first on AMBCrypto.

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