Bitfinex's LEO token has a major liquidity problem

LEO, a token issued by Bitfinex's parent company, iFinex, was revealed to have a major liquidity problem.

Bitfinex order books revealed that $500,000 buy and sell orders swung LEO's price by 25 percent.

Launched earlier this year, LEO token was issued by iFinex Inc., Bitfinex and Tether's parent company based in the British Virgin Islands.

The company used LEO to raise funds to cover the $850 million loss it encountered when the funds it sent to a Panamanian payment processor were seized by authorities.

What made LEO attractive to investors was Bitfinex's continuous burn mechanism - the company said it would dedicate at least 27 percent of its revenue and the revenue of its subsidiaries to buy back the LEO tokens it sold.

Gross revenues from iFinex will be allocated toward the purchase of LEO tokens at market rates until 100 percent of the tokens have been burned, the company said.

No liquidity in LEO. Su Zhu, the CEO of Three Arrows Capital, pointed out on Twitter that LEO was a relatively illiquid market.

Many fingers were pointed at LEO, which saw major price fluctuations in the past couple of days.

While Zhu said LEO fell into the category of preferred shares, others insisted that LEO's price/volume action makes it closest to a coupon bond.

The intense discussions led about the future of the token seem to have affected LEO's price, which dropped from $1.99 in the second half of June to just $1.30 in the second half of July.