The recent bankruptcy of the FTX Group and the “hack” have resulted in a “contagion effect” that has given rise to speculation as to which other crypto companies could collapse.
KuCoin, referred by itself as “The People’s Exchange”, has more than 20 million users worldwide and US$660 million in daily trading volume. This certainly puts them in the top 10 most popular exchanges on the market.
On November 11, 2022, FTX, FTX US, and Alameda filed for bankruptcy in the United States. This came after several days of suspension of withdrawals on the exchanges, in addition to rumors circulating that they were already having problems.
On the same day, a hacker, later identified as a former employee of the FTX exchange, was reported to have extracted more than US$600 million from FTX. It was also revealed that one of the reasons for the collapse of FTX was because Alameda Research, which was the trading house of FTX, had spent almost US$10 billion in cash belonging to its clients.
How the FTX Collapse Could Affect KuCoin
The FTX crash has brought the security of all centralized cryptocurrency exchanges to the fore. The revelations that FTX had been mishandling client funds have also sparked fear among cryptocurrency traders.
As a result, being a major exchange, KuCoin was the subject of rumors and questions about their solvency and whether they are safe from FTX contagion.
In this regard, KuCoin has expressly denied that it has exposure or has deposited funds in FTX. Also, to reassure its users, KuCoin has promised to launch its Merkle Tree Proof of Reserve (POF). The exchange is also awaiting the completion of an audit by third-party auditor Aarmanio LPP. Both are expected to be completed in one month, that is, at the beginning of December 2022.
KuCoin Addresses Exit Rumors Following FTX Collapse
On November 9, 2022, KuCoin CEO Johnny Lyu wrote a letter addressing the FUD (Fear, Uncertainty, and Doubt) surrounding the exchange. The buzz surrounding KuCoin originated from a stablecoin output chart from Nansen, a Blockchain analytics firm, whose flowchart showed that US$300 million had flown out of the exchange.
However, Nansen CEO Alex Svanevik was quick to clarify that the US$300 million was simply an exchange from the USDT network to Tron. Therefore, the funds had not in fact left the KuCoin exchange.
Lyu also clarified on Twitter that KuCoin does not have any exposure on FTX or FTT. This allayed speculation from Cobie, host of the UpOnly podcast.
In conclusion, it seems that the KuCoin exchange is safe from the FTX crash for now. However, users are still advised to keep their funds off of any exchange, and to consider storing their cryptocurrencies in hardware wallets, as it means that the cryptocurrencies are in their own custody.
By Audy Castaneda
