Nov 14, 2022 at 06:36Contents
After the FTX exchange announced going bankrupt, many other major crypto exchanges, including Binance, Kraken, Crypto.com, Gateio, KuCoin, Huobi, OKX, Deribit and Bybit, have committed to or already implemented a Proof-of-Reserve checking mechanism to ensure full transparency of their assets. Nevertheless, the crypto community already has serious questions about some exchanges from this list.
About the three problematic exchanges in brief
The head of Binance has publicly called the audits of some crypto exchanges about the balance sheets of their exchanges questionable because their wallets recorded large transactions before and after the publication of this report data.
Here are the three exchanges that the community suspects of filing fake data about their reserves:
- Huobi
- Gate.io
- Crypto.com
They were caught juggling large amounts of cryptocurrency — all three have large spikes, drops, or fluctuations in balances on the order of 10,000 BTC to 40,000 BTC during the last 24 hours.
The brand new newsletter with insights, market analysis and daily opportunities.
Let’s grow together!
Crypto com: We are currently experiencing delays with crypto withdrawals due to network traffic. We are currently monitoring this issue. https://t.co/po5RwG1j4b pic.twitter.com/DQ1bCK3EgM
— Wu Blockchain (@WuBlockchain) November 14, 2022
What is known about the three problematic exchanges?
Immediately after Huobi released its reserves report, 10,000 ETH were transferred to Binance and OKX deposit wallets. The Huobi34 wallet, which had 14,858 ETH at the time of the snapshot, had only 1,500 ETH left on the next day (the balance had risen to 2,600 ETH at the time of the article release, but still far from the report level).
Huobi announced $18.1 million in crypto cant be withdrawn on FTX- $13.2m are customer assets.
A $14m unsecured loan will cover the client loss, creating a $32m debt for Huobi
Like I said before: there will be unpredictable fall out from FTX in the following weeks. Derisk now. pic.twitter.com/Wj1gZ9ush8
— Rugdoc.io (@RugDocIO) November 14, 2022
Crypto․com sent over 280,000 ETH from the cold wallet to the Gate exchange just after the public report. The CEO admitted that they sent their transfer to the wrong destination, “We contacted the Gate team, and the funds were eventually returned to our cold vault.”
In addition to this oddity, according to the exchange’s confirmed reserves, Shiba Inu (SHIB) is the second largest reserve asset after Bitcoin. At the moment, that exchange has over $2 billion in reserves, of which almost $570 million is placed in SHIB. This also came as an unpleasant surprise to many.
Some reputable crypto influencers recommend withdrawing assets from crypto․com as there is a problem with their capital flow. At least 90,000 panic withdrawals from crypto.com have been recorded after the prominent exchange accidentally sent $400 million to the wrong wallet last weekend.
https://twitter.com/WhaleCoinTalk/status/1591691116868702209
Listing the good guys and the bad guys
Here are all the exchanges that have confirmed their reserves so far, following the example of Binance:
Exchanges not marked blue at the moment are under serious danger.
Statistics confirm record withdrawals from exchanges
Analyst company Glassnode reported that Bitcoin withdrawals from cryptocurrency exchanges reached almost an all-time high of 106,000 BTC in a month on November 13. Glassnode experts say the market has only experienced a similar scale of BTC outflows in its history three times — in November 2020, April 2022, and June/July 2022. The agency reported that the number of wallets to which Bitcoins were withdrawn from exchanges increased to 90,000 addresses on November 9.
The outflow of Bitcoins from exchanges to wallets usually signals the imminent growth and storage of BTC in the long term. This time, however, experts believe the current scenario is the result of a strong decline in confidence in centralized cryptocurrency exchanges.
Glassnode analysts point out that Bitcoin outflows have led to positive balance changes in standalone wallets of all types of investors, from shrimp to whales. All of this points to the widespread trend of Bitcoin self-storage and greater caution on the part of investors, which can only be welcomed.
How can I make money on this?
Immediately after the collapse of FTX when Bitcoin suddenly fell to $18k there were calls to buy the dip. Now, after a couple of days, we can say that our advice to stay out of the market in a panic proved to be correct. Bitcoin is now at $16k.
Expect the FTX story to run out of steam during this week, after which you can start to cautiously buy the most liquid crypto assets from the Top 10, which are now much cheaper and look interesting. While it seems that the worst is over, we should remain cautious lest the FTX story throw up some new negative surprises, so patience and caution will be required.
9
