Following FTX and BlockFi Bankruptcies, Is Crypto.com Subsequent?

Saying that it has been a tough 12 months for crypto can be fairly an understatement. The Terra/Luna crash, Axie Infinity hack, Celsius collapse, Three Arrows Capital fiasco, and now the FTX controversy are sufficient to have anybody questioning about the way forward for crypto. With fears of contagion beginning to mount up, all of us are questioning what firm will comply with. With Crypto.com having been uncovered to FTX, many consider that Crypto.com may very well be subsequent.

The crypto market now sits below the $900 billion mark, one thing few would have predicted after a meteoric 2021 rise that noticed the crypto market attain the $3 trillion mark. With crypto winter having prolonged method past what most traders predicted and the present panic spawning throughout the ecosystem, crypto firms are discovering themselves making an attempt to calm traders.

Low Liquidity Belongings May Be a Downside for Crypto.Com

Crypto.com, which has been the goal of criticism over the previous month, has discovered itself doing its greatest to guarantee traders of its platform’s liquidity. Issues round Crypto.com’s liquidity stem from the platform’s reliance on low liquidity property like Shiba Inu and CRO (its personal token). With solely 60% of all property being in liquid cash like BTC/ETH/USDT/USDC/DAI/BUSD, traders had been fast to take motion. 

2.

5 Ethereum wallets and 6 BTC wallets of https://t.co/INIxikglp6 maintain a complete of $2.68B property.

Together with:– 51,836 $BTC($857M)– 58T $SHIB($531M)– 364,969 $ETH($446M)– 184M $USDT– 88M $USDC– 1.2B $CRO($80M)… pic.twitter.com/QdQKkaGBZr

— Lookonchain (@lookonchain) November 13, 2022

Cronos (CRO), Crypto.com’s token, dropped in worth considerably after FTX’s collapse. This came about as quick CRO merchants paid as a lot as 3% premiums to lengthy merchants, which based on UTXO Administration Senior Analyst Dylan LeClair is “the very same dynamic that occurred earlier than Celsius and FTX collapsed.”

Crypto.com Govt Speaks

Issues round the way forward for Crypto.com pressured Chief Govt Officer Kris Marszalek to talk publicly concerning the fears. Taking questions by way of a YouTube dwell stream, Marszalek assured traders that the platform had sufficient reserves to match each consumer deposit. In line with Marszalek:

“Our platform is performing enterprise as normal. Individuals are depositing, persons are withdrawing, persons are buying and selling, and there’s just about regular exercise simply at a heightened stage. We by no means interact as an organization in any irresponsible lending practices, we by no means took any third-party dangers. We don’t run a hedge fund, we don’t commerce prospects’ property. We at all times had 1-to-1 reserves.”

Analysts have been fast to level out that whereas Crypto.com may not be a hedge fund, the platform’s reliance on third events may very well be an extra supply of threat for traders. In truth, Marszalek stated that the platform had obtained $990 million from FTX and its publicity was restricted to $10 million.

Marszalek additionally introduced through the stream that the corporate can be publishing an audited proof of reserves inside weeks and that the corporate would proceed working as normal. Nonetheless, blockchain information exhibits that Crypto.com withdrew over $260 million USDT from Binance and Circle earlier than the announcement, which has additional raised the alarms within the crypto house. Binance CEO Changpeng Zhao tweeted on this regard:

https://twitter.com/cz_binance/standing/1591690261029130240

The Crypto.com Controversy Is Extending

Whereas Crypto.com is but to publish its proof-of-reserve audit, Binance has already began establishing a proof-of-reserves system that might enable anybody to test the corporate’s solvency. Whereas properly obtained by many traders, specialists like Kraken’s CEO Jesse Powell had been fast to level out the ignorance on liabilities. In line with Powell, this renders the PoR pointless.

I am sorry however no. This isn’t PoR. That is both ignorance or intentional misrepresentation.

The merkle tree is simply hand wavey bullshit with out an auditor to ensure you did not embody accounts with unfavorable balances. The assertion of property is pointless with out liabilities. https://t.co/b5KSr2XKLB

— Jesse Powell (@jespow) November 25, 2022

Crypto.com has been broadly criticized through the years for its reliance on costly advertising campaigns, renaming of sports activities venues, and sponsorships. Whereas these strikes are actually not a sign of future threat, they may not be sufficient for the corporate to ease issues about its funds. The present controversy would possibly very properly signify a novel alternative for Crypto.com to step up and present a special face to the platform.

With the whole thing of the crypto world nonetheless ready for the publishing of the proof of reserves, strain is mounting on Crypto.com and different exchanges to develop into extra clear. Whereas a short-term chapter is extremely unlikely for Crypto.com, extra info and details are wanted to make a legitimate prediction of the platform’s future. For now, warning must be the legislation of crypto land.