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A new exchange in the eye of the storm?

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Key facts:
  • Crypto.com showed proof of reserves that was not very encouraging to the public.

  • Their token has lost almost 85% of its value this year 2022, although this does not seem to affect their business.

The domino effect following the collapse of the FTX is ongoing. Not only that, over a hundred companies have filed for bankruptcy along with the exchange and its trading wing Alameda Research. Other exchange platforms are also at the center of the controversy. Crypto.com, another major global exchange, has not escaped the situation.

There are some parallels between Crypto.com and FTX that worry the cryptocurrency industry public.. Multimillion-dollar expenditures on marketing campaigns, the acquisition of naming rights to an arena of the U.S. professional basketball league, the NBA, and the collapse of its own token, for example.

CRO, Crypto.com’s token, is inactive. over 80% so far this year 2022. And that would be the element that generates the most fear about the future of this platform, whose name seems brand new in the home of one of the NBA’s most successful and iconic teams, the Los Angeles Lakers.

After all, let us remember that the catastrophe of the FTX catastrophe began with the loss of value of its native token.ITF. When Binance CEO Changpeng Zhao announced on Sunday, November 6, that he was selling all his TLTs due to new findings on FTX, it all came rushing in.

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Growing distrust led the CRO to a more sustained decline in the short term: more than 40 percent depreciation in a single week, as can be seen in the chart below.

crypto.com price
The FTX debacle seems to be affecting the entire cryptocurrency sector, and now all eyes are on crypto.com.

Contested fund reserves and serious errors

As if that were not enough, a few days ago the stock exchange made a very serious mistake. They sent millions of dollars in a transaction to the wrong address, even though they later managed to recover the funds.

With the credibility of stock exchanges wavering, the public did not take Crypto.com’s proof of reserves very well either. In essence, noting that 20 percent of reservations are in a cryptocurrency meme such as Shiba Inu (SHIB).as reported by CryptoNews. It is the second most popular cryptocurrency on the exchange, behind only bitcoin (BTC), and this has set off alarm bells.

The exchange’s CEO, Kris Marszalek, offered proof of Crypto.com’s reserves of more than $2 billion in a release. But this is not the result of an audit, which he promised to make public at a later date.

Full disclosure, Apparently, 20% of the exchange’s reserves are in its own tokens, CROs. This creates some unease because, according to various reports, one of the main liquidity problems that led to the FTX debacle was holding a very large number of reserves in its own token.

There is currently no concrete evidence or indication that Crypto.com is in the same situation as FTX. Especially since, despite the parallels that can be drawn, there is nothing to indicate that they have invested their users’ money in risky activities, unlike FTX.

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The defense of the CEO of Crypto.com

Marszalek did not turn a blind eye to the criticism the exchange is currently receiving: in a interview conducted on the stock exchange’s YouTube channel, the executive denied that the company was at risk.

In addition, he stated that his financial exposure to FTX, which he also had, did not exceed $10 million.. A figure that, according to the CEO, is “less than the possible $1 billion turnover that the two exchanges had together previously.” In this regard, he stated that his exchange has a “solid” balance sheet.

Meanwhile, the exchange continues to operate normally, unlike other platforms that have shut down withdrawals to their customers and are concerned about a possible debacle. According to CoinMarketCap, it remains the 18th largest exchange in the market.

Crypto.com has moved over $600 million in exchange volume in the past 24 hoursaccording to the same source. This figure represents an increase of more than 23 percent over the previous day, so it seems that despite possible doubts focused on the exchange, users continue to bet on trading on its platform.

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