The virtual currency market is shaken by the bankruptcy of FTX…
With the cryptocurrency exchange FTX finally bankrupt due to the liquidity crisis, the cryptocurrency crisis from FTX is showing signs of spreading to other exchanges.
According to Coinbase, the largest cryptocurrency exchange in the U.S., the Coin “Cronos (CRO)” issued by Crypto Dotcom plunged by 20% compared to 24 hours ago. Crypto Dotcom is the world’s top 15 cryptocurrency exchange based on trading volume.
The sharp drop in Chronos occurred after 320,000 Ethereum was transferred from Crypto Dotcom accounts to Gate IO exchanges of similar size. The transferred amount exceeds 80% of Ethereum’s holdings.
Crypto-dotcom explained that the remittance was a “mistake.” Crypto-dotcom CEO Chris Mazalek said on his Twitter account that “the funds were wrongly transferred to other accounts” and that it was due to a “mistake.”
“We have recovered $400 million (about 520 billion won) of Ethereum from Gate Io,” he said, explaining that 320,000 Ethereum were scheduled to be transferred to the new “cold storage,” an offline wallet, but were sent elsewhere outside. It also said that all customer funds are stored in “cold storage” and that “hot wallet” is only for corporate assets. “Hot Wallet” is a wallet that can be connected online and withdrawn immediately, and cold storage is a storage that exists offline and cannot be withdrawn immediately.
However, despite Crypto Dotcom’s explanation, there are suspicions that these exchanges are not preparing enough reserves for customer withdrawal. Some exchanges are “blocking” each other by lending insufficient funds.
Earlier, FTX, the world’s third-largest virtual asset exchange, also went bankrupt after allegations were raised that its financial status was poor, saying it had increased its business size by taking loans as collateral with “self-issued coins.” According to the U.S. CoinDesk, 30% of assets of the FTX affiliate Alameda were held as FTT, a virtual currency issued by FTX, which raised suspicions of weak financial soundness and led to investors’ “bank run (large-scale deposit withdrawal).
Meanwhile, the FTX crisis is also raising voices for stricter regulations on the virtual currency market. Democratic Senator Elizabeth Warren issued a statement on the 11th calling for strong regulations on the coin industry. Former U.S. Treasury Secretary Larry Summers compared the collapse of FTX to the 2001 Enron crisis, which is considered the largest financial fraud case in U.S. history, and said, “It smells like fraud, not financial errors. “It exploded when no one understood where the huge (coin) property came from,” he pointed out.