LEO premium may hint at movement on hacked Bitfinex BTC tied to 30% of US Strategic Bitcoin Reserve, analyst says

The elevated valuation of Bitfinex’s LEO token may signal that the market expects progress in the long-running legal process surrounding bitcoin seized from the 2016 Bitfinex hack, according to K33 Head of Research Vetle Lunde.

The Strategic Bitcoin Reserve was established by the U.S. government in 2025 to consolidate bitcoin obtained through seizures and forfeitures. Since its creation, additional enforcement actions have increased total estimated government holdings to about 328,372 BTC, Lunde noted in a Wednesday post. However, approximately 94,636 BTC tied to the Bitfinex hack — roughly 30% of the reserve — remain subject to legal proceedings and could ultimately be returned to victims rather than retained as sovereign assets.

LEO is a utility token issued by Bitfinex in 2019 to help strengthen its financial position following earlier separate capital losses, with its supply reduced through ongoing buybacks and burns. Bitfinex has committed to using 80% of any bitcoin recovered from the 2016 hack to repurchase and burn LEO, directly tying the token’s value to the seized coins.

LEO’s market capitalization currently sits near $8 billion, according to The Block’s LEO price page, representing a roughly 60% premium to its implied fair value based on Bitfinex’s previously disclosed plan to use recovered bitcoin to buy back and burn the token, Lunde said.

Lunde noted that the current premium is the highest since the initial seizure announcement in 2022, raising the possibility that market participants may be positioning ahead of a potential resolution.

However, he warned that the premium may also reflect typical price drift driven by LEO’s illiquidity and concentrated ownership. The token ranks in the bottom quartile of the top 100 cryptocurrencies by trading volume, meaning relatively modest buying or selling activity can lead to outsized price swings.

Bitfinex bitcoin could materially reduce government holdings

U.S. authorities seized approximately 94,636 BTC linked to the Bitfinex hack in 2022, and courts have signaled that the bitcoin could be returned in kind to victims rather than sold. However, the assets remain frozen while ancillary forfeiture proceedings determine how recovered funds should be distributed among individual claimants and Bitfinex itself, Lunde said.

Under U.S. forfeiture law, third parties must be allowed to assert ownership claims before distribution occurs. Some claimants argue they are direct victims entitled to individual recovery, while Bitfinex has argued that certain claims stem from post-hack balance adjustments rather than direct ownership of specific coins. Until those disputes are resolved, the bitcoin will remain in government custody.

If the bitcoin is ultimately returned and Bitfinex follows its stated buy-and-burn strategy, roughly 75,000 BTC could gradually reenter the market over 18 months, equivalent to about 139 BTC per day. Lunde said this level of distribution “may spook the market,” but he added that it would be modest compared with recent selling activity from long-term holders and ETF flows.

Bitcoin drawdown and ETF outflows

The potential shift in government-held bitcoin comes amid broader weakness in the crypto market. Bitcoin has fallen about 50% from its all-time high and is trading approximately 25% below the average entry price of U.S. spot bitcoin exchange-traded funds, leaving most ETF holders underwater, Lunde noted in a separate Tuesday report.

Despite that drawdown, only 7.1% of ETF-held bitcoin has been sold since holdings peaked in October, suggesting investors are largely maintaining exposure, he said.

Institutional positioning appears to be a key factor behind the relative stability. About 25% of bitcoin held via ETFs belongs to broadly diversified institutional investors, with an average allocation of just 0.56% to BlackRock’s IBIT fund, Lunde noted. This limited allocation reduces the urgency to sell during downturns, while diversified portfolios among smaller ETF holders further reduce pressure from drawdowns, he said.

At the same time, bitcoin exchange-traded products have experienced their deepest recorded drawdown in holdings, with net outflows of 113,224 BTC from a peak of 1,593,803 BTC, per the report. Thirty-day outflows alone reached 54,190 BTC in mid-February, marking the third-largest monthly decline on record. Even so, nearly 93% of ETF-held bitcoin remains in place, underscoring the long-term orientation of institutional investors, Lunde wrote.

The analyst said bitcoin is now approaching its 200-week moving average around $58,500, historically an important inflection point that has marked prior market bottoms. While the 2022 downturn involved forced selling from leveraged entities and structural failures, he said similar systemic risks are not evident today, which increases the appeal of current price levels for long-term investors.