17.11.2022, 07:59

Warning about the safety of cryptocurrency exchanges

Warning about the safety of cryptocurrency exchanges

An “earthquake” is happening in the crypto market as the largest US cryptocurrency exchange FTX files for bankruptcy.

The event that the largest US cryptocurrency exchange FTX filed for bankruptcy a few days ago was described by analysts as a seismic event in the cryptocurrency market. The crash of the FTX exchange is one of the biggest cryptocurrency crashes in recent times. Within 72 hours, traders rushed to withdraw $6 billion from the platform.

FTX appealed to rival exchange Binance for help, but Binance did not throw a lifeline. Since FTX’s cryptocurrency transaction size is not small, some analysts predict it will have a knock-on effect on the blockchain industry.

Jim Bianco – President of Bianco Research said: “The impact will be similar to the Lehman Brothers case because FTX.com’s customers are not only individual investors, but also brokerage companies, delivery shops. Translators, hedge funds, even cryptocurrency miners. Now these institutions’ money is stuck at FTX.com. They won’t be able to access their money for the next few years.”

One of the reasons why FTX is in a state of crisis today is the exchange’s misuse of user deposits. According to experts, the step that brings the FTX exchange to its current end is to participate in risky ventures with the assets of customers.

The incident caused the global crypto community to immediately question the transparency of the operations of crypto exchanges. Ahead of the event, Binance CEO Changpeng Zhao (CZ) has just called on crypto exchanges to provide proof of customer deposit management.

“Certainly, cryptocurrency exchanges will now have to be more open and transparent. All cryptocurrency exchanges are now witnessing a loss of money. Many of them are based in Korea or Japan. Investors no longer have confidence in cryptocurrencies like they used to. The days when Elon Musk on TV called to invest in Dogecoin to get rich overnight is over. Now everyone only cares their money deposited on these exchanges and brokers is still safe,” said Jim Bianco.

In its bankruptcy filing, FTX Trading said it had assets between $10 billion and $50 billion, liabilities between $10 billion and $50 billion, and more than 100,000 creditors. Analysts believe this is not the last default in the crypto ecosystem and predict a knock-on effect of the FTX case on other companies. FTX is currently under investigation by the US Securities and Exchange Commission, the US Department of Justice and the Commodity Futures Trading Commission.

Source: CafeBiz