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LEO, Bitfinex’s exchange token, was launched last month after allegedly raising nearly $1 billion in USDT and USD in a private token sale. Similarly to BNB, one of the most important value capture propositions is a quasi-claim to Bitfinex’s cash flow via the burning mechanism.

Bitfinex buys back LEO tokens at market value worth 27% of the revenue and then burns them (every three hours) until all LEOs are removed from circulation. For now, Bitfinex only burns the revenue from trading fees but it vouched to eventually burn other revenue streams as well.

The size of the burn logically varies depending on the revenue from trading fees and the price of LEO. So far, there have been 19 days of burns throughout which $2.8 million in LEO (~1.5 million LEO) has been burnt in 151 on-chain burning events.

Knowing that the total burnt amount represents 27% of revenues from trading fees, we can deduce that Bitfinex generated nearly $10.4 million in revenue from trading fees. That’s, on average, $550,000 of revenue a day from trading fees.

In the LEO whitepaper, Bitfinex self-reported gross profit of $333.5 million in 2017 and $418.2 million in 2018 with profits of $326 million in 2017 and $404 million in 2018.

But since we also know the figures for the reported trading volume on Bitfinex, we can get a better sense of how much of the trading volume Bitfinex captures as revenue (on average).

As expected, the trend between volume and revenue is consistent — when volume increases, revenue increases as well and vice versa. But when looking at the ratio between revenue and volume, we can see that there has been a significant change in the last couple of weeks.

Throughout the first four days of burns, Bitfinex captured more than 0.15% of the volume. But in the last two weeks, the ratio has dropped by 38% to an average of 0.1%. This could mean three things:



Larger clients are trading on Bitfinex



Bitfinex has not been burning enough LEO



Bitfinex is over-reporting its volumes



The likeliest reason is that Bitfinex has been attracting larger clients. And larger clients could also be holding LEO, which gives them additional trading fees discounts. Paolo Ardoino, CTO of Bitfinex, seemed to have confirmed this theory on Twitter, saying that the "decrease [of the ratio] is mainly due to the new discounts introduced for LEO holders. Taker fee discounts are quite big if you hold a lot of [LEO]."

Bitfinex uses a tiered system for trading fees based on the monthly number of executed orders, which means that the fees decrease as a participant’s monthly trading size increases.

The increase of larger-volume clients would be consistent with the lack of retail customers throughout the recent price rally. Trading volume data suggests the catalyst on June 22 (when BTC first broke $10,000) was a large trade/set of large trades on Bitfinex.

Therefore, the analysis of LEO burns could hint at whales playing a large role in the recent price rally.