Is Crypto.com in trouble, and should you get your crypto out?
FUD… FUD everywhere.
After last week’s events, users are questioning the safety of other crypto exchanges. The next victim, Crypto.com?
Yes, the Singapore-based crypto exchange that famously renamed the Los Angeles Staples Center to Crypto.com Arena in 2021.
Something sketchy is going on…
On Nov. 11, Crypto.com released a Proof of Reserves audit to show that the custodian crypto exchange actually holds what it owes clients.
In the audit, it was discovered that Crypto.com accidentally transferred $400M (82% of their ETH holdings) to the wrong account in October — which it later recovered.
Crypto Twitter began speculating on the health of the exchange.
- Many aren’t taking any chances. Crypto.com saw massive amounts of withdrawals after the report.
- Making matters worse, users started saying that their withdrawals weren’t being processed.
On Monday, Crypto.com’s CEO held an AMA to ease concerns.
Are funds safe on other major crypto exchanges?
Short answer, assume no centralized exchanges (i.e., Coinbase, KuCoin, Crypto.com, Gate.io) are safe.
Basically, every exchange out there: “DW, your assets are safe.”
But also FTX, four days before it filed for bankruptcy: “Assets are fine” (Tweet now deleted).
Last week, Coinbase (NASDAQ:COIN) released a statement saying:
- They hold customer assets 1:1 — meaning you can pull your investments out at any moment without issue.
- They have a strong cash position, ending the third quarter with $5.6B in USD resources.
But it’s difficult to ignore Coinbase’s newly added disclosure this year, which basically says if Coinbase goes bankrupt, it can use your crypto to pay back lenders before paying you.
Investors: Crypto best practices
“Not your keys, not your crypto” is one of the most important phrases in crypto. What does it mean?
In one sentence: Centralized crypto exchanges have control over your tokens held inside the exchange.
To avoid an FTX situation, follow some basic rules of crypto:
- Never hold a significant portion of your crypto on centralized exchanges.
- If you use centralized exchanges to make a trade, move your crypto to a personal wallet asap.
Also, learn the difference between centralized and decentralized exchange. It’s a bit more complicated, but it could save you lots of money and pain.