KuCoin Denies Rumors That It's Insolvent. What's Really Going On?
- KuCoin CEO says the platform is operating well and there are no plans to halt withdrawals.
- There are rumors on social media that KuCoin could be facing difficulties.
- Crypto assets are not protected by FDIC insurance like dollars in a bank account.
KuCoin jitters are a sign of how nervous investors are.
In another climate, rumors on social media that crypto exchange KuCoin might be in trouble would almost certainly be ignored. However, in the current jittery market, many have taken an pseudonymous tweet from someone whose handle is "otteroooo" seriously. KuCoin's CEO has vehemently denied the platform faces any problems.
The collapse of Terra's LUNA ecosystem has shaken the foundations of the crypto industry. Several decentralized lenders have frozen withdrawals, and one prominent crypto insider says more platforms will fall. Even a hint that a platform is in trouble can cause panic, and it's difficult to know what to believe. Here's what we know about the KuCoin saga:
1. Otteroooo tells investors to withdraw their funds
Last week, otteroooo tweeted a warning to KuCoin customers that they should "withdraw from KuCoin right now." The account has only been active since March, and the feed contains a steady stream of comments about the issues faced by other crypto platforms. But how reliable is the source? The line, "Otter hardly wrong in such matters," is not exactly convincing.
Otteroooo followed up with two other messages. One insisted that "Otter has, had, will have NO short NO long position in $KCS." KCS is KuCoin's native token. The other said, "Otter has an ongoing discussion with @lyu_johnny from kucoin to confirm the findings, because he reached out."
2. KuCoin CEO denies insolvency rumors
Johnny Lyu quickly took to Twitter to assure investors there was, "No plan to halt withdrawal, everything on KuCoin is operating well." Lyu shared some information about KuCoin's operations and told people to make their own judgments. These include:
- Completing a $150 million fundraising round with a $10 billion valuation in May.
- It is one of the few crypto platforms that is still hiring. Other exchanges have laid off staff in recent months.
- The platform has launched new features, even during the bear market.
Finally, Lyu said the company would publish its 2022 H1 report with more details on KuCoin's operations. He warned that it reserves the right to take legal action against those who intentionally spread FUD. FUD refers to fear, uncertainty, and doubt, and is used to describe the spreading of misinformation.
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The difficulty for KuCoin is that Celsius's CEO told users their funds were safe just days before the platform froze withdrawals. People don't know who to trust. With little regulation to control how platforms behave and what information is released to whom, it is hard to find solid ground.
What's for sure is that Lyu has more credibility than a pseudonymous Twitter character. Plus, I had no problems withdrawing from KuCoin earlier today -- several days after the first tweet. Other KuCoin customers reported on social media that they've been able to withdraw funds as well.
My successful withdrawal, along with the fact that KuCoin is still hiring and didn't spend lots of money on huge advertising campaigns suggests that otteroooo's comments may be unfounded. I'm also suspicious that otteroooo hasn't followed up with the details he promised that would support his allegations. However, given the levels of uncertainty in crypto right now, I'd prefer to be safe than sorry.
Consider a crypto wallet
If a bank collapses, your assets are protected by something called FDIC insurance. This protection doesn't exist in crypto, which means you could lose your funds if the platform goes bankrupt or collapses. That's not a risk I want to take.
As a result, I've moved my crypto off several different exchanges to a crypto wallet that I control. Sure, there are costs involved in moving funds to external crypto wallets, both in terms of the withdrawal fees and the loss of returns on staked funds. But if my assets are in a custodial wallet on a crypto exchange, I could lose them completely.
A non-custodial crypto wallet is something you control. It can be a hot wallet that's connected to the internet, or a cold wallet that's kept offline. The danger is that you are completely responsible for it -- if you lose the password, you might lose access to your assets. There are billions of dollars stuck in wallets people can't get to. Before you open a crypto wallet, take time to understand how they work and how to keep it secure.
We know that a number of platforms are in trouble, we just don't know which ones. If your crypto assets are in a custodial wallet on a centralized exchange, now might be a good time to investigate the pros and cons of crypto wallets. If you wait too long, and your platform then freezes withdrawals, you may no longer be able to access your money. These are wild times for crypto investors, and it's worth reducing risk in any way possible.
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