Bitfinex has finally begunÂ to reimburse itsÂ customers.
Announced 1st September, the Hong Kong bitcoin exchangeÂ revealedÂ it had purchasedÂ more than 1% of the blockchain debt tokens it issued to customers in August as a way to pay them back for losses it experienced in a debilitating hack.
While a small step to recovery, analysts were largely positive about the move due in large part to the exchange’s decision to purchase the tokens at anÂ above-market value of $1 each,Â roughly double the market value when the redemption took place.
Since the company’s issuance the value of the tokens their value has fluctuated, but it has never approached the $1 mark promised by the exchange, sparking prominent concerns it would seek to buy back its own liabilitiesÂ at a discounted market rate.
However, many still harbor doubts about the exchange, which lost roughly 120,000 BTC ($70m) in a security breach, and how it will navigate its complicated financial situation going forward.
While analysts said Bitfinex’sÂ efforts thus far are “respectable”, others argue the markets will need to wait and see whether the exchange is committed to “a full recovery of lost coins”.
To rewind, the buyback is perhaps the most significant of a series of small steps made by Bitfinex since itÂ temporarily halted trading and withdrawals last month and ultimately issued its own debt tokens on a blockchain.
The exchange first announced plans to generalize the financial loss it suffered in the hack across all customer accounts nearly a month ago, and in exchange for the 36% haircut, Bitfinex provided accountholders with blockchain-based assets called BFX tokens.
The exchange stated BFX tokens could either be redeemed by Bitfinex or converted to equity in its parent company, iFinex, though many doubted the claim and its legality.
Yet, Bitfinex’s decision this weekÂ “instills more trust and allows them to simultaneously develop the BFX marketplace”, said Rik Willard, founder of and managing director of Agentic Group LLC.
Willard is not the only analystÂ who noted the redemptionâ€™s impact on the appeal of BFX tokens. Elsewhere,Â cryptocurrency investment fund manager Jacob Eliosoff emphasized that the market “is liking” the redemption.
He pointed to the tokenâ€™s climb in value during yesterday’s tradingÂ from $0.50 to $0.57 as a sign this assertion is correct.
However, Eliosoff emphasized that he is moreÂ troubledÂ about what he sees as a lack of transparency by the exchange in the wake of the hack.
As reported last week, the exchange is reportedly still investigating the incident, though no loss report has yet been issued. Other information has been scarce, as noted byÂ Eliosoff.
“If their plan is to buy back the BFX in dribs and drabs like this, why not announce it? How did these funds suddenly become available?” he told CoinDesk.
He noted that Bitfinex has more time to plan and communicate than it did immediately following the hack, and therefore the exchange should take advantage of this opportunity.
Arthur Hayes, CEO of BitMEX, voiced similar concerns, telling CoinDesk:
“Many in the community would like to hear Bitfinex management layout a concrete plan for future redemptions.”
More specifically, they would be interested in learning theÂ financial performance the company requires to trigger future redemptions and “what portion of revenue is being dedicated toward extinguishing this liability”.
While Eliosoff expressed his doubts about Bitfinexâ€™s transparency, Petar Zivkovkski, director of operations for full-service bitcoin trading platform Whaleclub took a slightly darker slant on the the exchangeâ€™s response to the security breach.
“I hold the view point that Bitfinex is trying to financially engineer their way out of this mess while transferring risk and debt onto their customers through their issuance of BFX debt tokens,” he said.
More than one legal expert has asserted that Bitfinex has placed itself on shaky ground by distributing these tokens, as doing so opens up the possibility of both lawsuits and fines from government agencies.
While Zivkovskiâ€™s portrayal of the situation may not seem particularly optimistic, Eliosoff simply noted that Bitfinex, at the very least, has shown it can keep its word.
Instead of buying BFX tokens for $1 each, the exchange could have just as easily taken the funds used and bought twice as many of these digital assets.
“But I respect that they’re sticking to what they said.”
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