Amidst the FTX drama, it is still not clear what contagion effects the collapse of the world’s second largest crypto exchange will have on the industry as a whole. In addition to numerous hedge funds that have already spoken out about their exposure to FTX and Alameda, several exchanges are currently in the spotlight.
The crypto community is currently evolving into on-chain detectives who want to discover if and which crypto exchanges are also mishandling their customer funds, trading with them, and thus not holding enough reserves. If a bank run like the one on FTX were to happen, they would not be able to withstand it.
Binance CEO CZ warned a few days ago, “If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away.”
With that in mind, the crypto community is currently focused on three crypto exchanges. As Glassnode’s lead on-chain analyst “Checkmate” explained, Huobi, Gate(.)io, and Crypto(.)com have been exhibiting “particularly weird BTC balance patterns” lately.
All three have large jumps, drops, or oscillations on the order of 10k $BTC to $40k $BTC. The same can be said for $ETH Balances, noting the weird ‘I accidentally transferred from crypto(.)com to Gate(.)io’ event.
In contrast, the analyst notes that Binance, Coinbase, Kraken, Gemini, Bitfinex, and Bittrex “look fairly vanilla” across BTC and ETH and do not trigger a red flag warning.
The Next FTX?
The rumors surrounding a collapse of Crypto(.)com are partly the exchange’s own fault. On-chain analysts found that Crypto(.)com shipped $500 million in ETH of users’ assets to Gate(.)io, by its own account “by accident.”
The exchange’s ETH and stablecoin reserves have massively decreased since the uncertainty evolved. CryptoQuant CEO Ki Young-Ju stated that 25-80% of ETH reserves have moved four times since September 2022. Stablecoins reserve dropped from $2.9B to $292M, -90% in the last 7 months.
ETH & stablecoins reserve on https://t.co/FmNiPK88vZ :
• 25-80% of ETH reserve moved four times since Sep 2022.
— Ki Young Ju (@ki_young_ju) November 14, 2022
CEO Kris Marszalek was quick to respond, clarifying that the ETH transfer was made accidentally over three weeks ago, on October 21, while the funds were withdrawn to a cold wallet…