Tech

Exchanges dismiss rumors of insolvency amid rampant speculation

11/29/2022
Bitcoin Ethereum News
Haru Invest

BlockFi became the latest platform to succumb to crypto contagion, filing for Chapter 11 bankruptcy on Nov. 28.

Weeks before, after FTX had also filed for bankruptcy, BlockFi issued a statement saying it could not “operate business as usual.” At the same time, the firm implemented a pause on withdrawals to “protect our clients and their interests.”

With the spate of recent insolvencies, the crypto community is on high alert over which platform is next to call it a day. Recently, social media chatter has focused on Binance, KuCoin, and Nexo.

Crypto exchanges in the firing line

On Binance, Bitcoin Magazine analyst Dylan LeClair said he was “getting weird vibes from CZ” based on his recent actions.

In addition, LeClair further speculated that the crypto bail-out fund, led by Binance, is a public show of strength, which, when applied to a quote from Sun Tzu’s The Art of War, suggests weakness.

“Appear weak when you are strong, and strong when you are weak.”

However, the Analyst tempered these comments by saying he has no “quantitative proof of any wrongdoing,” nor is he asserting any claims by making these comments. Yet he remains skeptical.

Commenting on the crypto bail-out fund in a recent interview with George Gammon of Rebel Capitalist, Swan Bitcoin CEO Cory Klippsten, who sounded the alarm on Celsius before its demise, said:

“He may be completely insolvent and it may all crash down, it’s very possible. But there is another reason to do it, which is just that if makes you five billion to spend two, then you do that. It could be a simple economic calculation.”

When pressed on his thoughts about Binance’s position, Klippsten mentioned that it appears that the firm has not gone heavy with high-risk directional bets. Like Coinbase, it seems Binance has been content with earning via “the house’s rake,” he said.

“It seems like they have not taken big directional bets and they’ve operated with more transparency, in the crypto world, assigning anyone a rating above zero as far as transparency is very difficult.”

KuCoin dismisses talk of insolvency

Similarly, the founder of Crypto Capital Venture Dan Gambardello pointed out that KuCoin is offering “some ridiculous APRs,” with locked Bitcoin paying out almost 300% interest.

In general, high-interest yield products are a red flag as there are doubts over sustainability, and such strategies have been used in the past to attract a final wave of liquidity only for devs to rug.

KuCoin responded by saying the high APRs relate to their “Dual Investment” products, and not their main earn product. Dual Investment refers to a “non-principal protected financial product with a floating return.” As such, the amount earned depends on the staked asset performance at maturity.

In a recent interview with CryptoSlate, KuCoin CEO Johnny Lyu dismissed rumors of insolvency, saying the firm is “fully liquid” and working on proof of reserves.

“I can confirm that we’re fully liquid and we are also publishing our asset status right now. As I mentioned, we are also collaborating with third-party auditors right now.”

Nexo said it has zero contagion exposure

On Nov. 16, an API error stopped the daily auditor attestation of Nexo’s assets exceeding its liabilities. The issue was resolved in a matter of hours.

However, the incident was met with a flood of messages on social media, warning that Nexo was insolvent.

With the crypto community still on high alert, Nexo issued a tweet thread on Nov. 28 to address lingering rumors. The thread went in-depth on its sustainable business model, objective liquidation policy, and prudent management of its Nexo Token.

Further, Nexo stated it has zero contagion exposure to bankruptcy or “struggling” entities.

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Source: https://cryptoslate.com/exchanges-dismiss-rumors-of-insolvency-amid-rampant-speculation/