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Cryptocurrency exchange Crypto.com has been put under the microscope after sending $405 million to the wrong beneficiary, and has been in virtual turmoil after a whirlwind of rival exchange FTX, which filed for bankruptcy on Friday, unraveled this week. Alarm bells are sounding among currency watchers.
Some crypto watchers scrutinizing the trade speculated that it was an attempt to underestimate the trading volume. To complicate matters, the analysts who first learned about the deal said they employee Rival Exchange Coinbase.
It also follows the debacle that took place in December. Crypto.com Accidentally Transferred $10.5 Million to Australian Woman Instead of a $100 refund.
Chris Marzarek, CEO of Crypto.com Said A company spokesperson told Yahoo Finance that the funds were supposed to go to an offline cold-storage crypto wallet, but were mistakenly transferred to another crypto exchange, Gate.io.
Some cryptocurrency exchanges hold accounts with competitors to increase liquidity during periods of high volatility.
Money transfers from the Crypto.com custody system are restricted to approved and whitelisted addresses associated with corporate accounts on cold wallets, hot wallets (connected to the internet), and third-party exchanges. It’s only possible between us,” said the spokesperson.
Still, the transaction has caused crypto investors to send prices of crypto.com exchange tokens over the past 24 hours (CRO-USD) 24% down. During the same period, Bitcoin (BTC-US Dollar) decreased by less than 2.5%, while Ether (ETH-US Dollar) fell 2.5%.
The incident also prompted many cryptocurrency exchanges to try to shore up confidence in the week of FTX’s collapse by hastily releasing “reserve evidence” that showed they were not using investor funds. It follows what has been done.
Some cryptocurrency exchanges, such as the US-based Kraken, have been using proof of reserves for years. Still, the metric may be inadequate depending on the frequency and balance sheet percentages chosen by the company.
In a best-case scenario, proof of reserves can prove solvency, said Sergey Nazarov, CEO and co-founder of Chainlink Labs, which offers proof of reserves products.
“It shows whether the assets that a company claims to own are actually available in real time,” Nazarov told Yahoo Finance of Chainlink’s product.
On Thursday, Crypto.com It was published It is proof of crypto wallet reserves, stating that it holds $3 billion in total client assets. As of Saturday, that figure had dropped 15% to $2.55 billion, according to Crypto.com’s wallet tracked by the blockchain analytics platform. Nansen.
During the same period, OKX, the third largest cryptocurrency exchange by trading volume after Binance and Coinbase, increased its assets by $114 million. It has $5.83 billion in assets, 64% in Ethereum (ETH-USD) and 25.8% in Bitcoin (BTC-USD). Nansen.
Since last Sunday, Binance’s assets have increased by $4 billion from $66.7 billion to $70.8 billion, according to Binance wallet. Nansen.
If you have proof of assets and liabilities, proof of reserves is great, Michael Anderson, co-founder of the Crypto Venture Capital Firm Framework, told Yahoo Finance. “It gives you part of the story. It helps people know if a business is borrowing money against a customer’s assets.
David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrencies and stock markets. Follow him on Twitter. @DsHollers
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