Many people active in the world of cryptocurrency will recall the recent bitfinex hack. This particular incident was quite newsworthy, as nearly US$70m worth of Bitcoin were stolen. Now that the company is preparing to convert their BFX tokens to company equity, more details regarding iFinex are made available. Apparently, Bitfinex is valued at US$200m, which seems quite high.
Bitfinex Is Valuable But Has A Tarnished Reputation
While Bitfinex may hold a lot of appeal for margin traders and other Bitcoin enthusiasts, a US$200m price tag seems a bit steep for this exchange. It is not overly different from other platforms, despite seeing a good amount of trading volume every day. But as a result of their recent hack, the security of this company should be in question.
To put things into perspective, there is no real reason why Bitfinex would be worth US$200m right now. These numbers come from a pre-money valuation of US$120m, with another US$80m in dilution. Although the company has become a big name in the Bitcoin industry in recent years, their reputation is no longer unblemished.
Contrary to what Bitfinex officials may believe, the trust in their exchange platform has dropped by quite a bit. No one wants to store funds in a platform that has been hacked before. Moreover, since there is no guarantee the security holes have been patched, it is impossible to tell if and when they might get hacked again.
On top of that, there is the BFX token to take into account. These outstanding balances represent the debt owed to platform customers after reducing account balances by 36% for everyone. These tokens can be traded against the US Dollar and Bitcoin, despite Bitfinex not holding the necessary license to trade it as a commodity.
That being said, the current plan is to have as much as 40% of the company being owned by creditors and new investors. It is evident the company wants to repay all outstanding balances, albeit doing so will be quite a challenge. Moreover, the US$80m in dilution is a liability rather than added value at this point. The valuation of this exchange will undoubtedly be a topic of substantial debate among Bitcoin users for quite some time to come.
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