EXCLUSIVE: Proof of Reserves 'Only Solution Left' for Crypto Exchanges to Regain User Trust, Says KuCoin CEO - Bitcoin (BTC/USD), Ethereum (ETH/USD), FTX Token (FTT/USD) , Dogecoin (DOGE/ USD)

EXCLUSIVE: Proof of Reserves ‘Only Solution Left’ for Crypto Exchanges to Regain User Trust, Says KuCoin CEO – Bitcoin (BTC/USD), Ethereum (ETH/USD), FTX Token (FTT/USD) , Dogecoin (DOGE/ USD)

Johnny Lyuthe CEO of the crypto exchange KuCoin was the first to announce the “proof of reserves”, after the FTX Token FTT/USD debacle has sent shockwaves through the cryptocurrency industry.

In an interaction with Benzinga, Lyu said the “evidence of reserves” is a direct reaction to the user panicking as he remains stuck on his funds, with several exchanges suspending withdrawals. “It’s the only way to show users that your funds are safe and that we are solvent,” he said as the exchange is four weeks away from launching its proof of reserve dashboard.

Lyu calls the current market scenario “spreading cancer,” pointing to crypto’s free fall, with total crypto market capital dropping from $1 trillion to $873 billion in just a few days.

Apex Cryptocurrency Bitcoin BTC/USD is down 22% in the last 7 days, while Ethereum ETH/USD, Dogecoin DOGE/USD decreased by 23% and 28% over the past week, respectively. “No one wants to see this, it’s heartbreaking to see innocent users hurt,” he said, acknowledging that it will take time for traders to trust crypto exchanges again.

When acquiring FTX: Lyu believes that only the collective effort of the entire industry can bring about change, and he is ready to help.

He proposes a solution to save the sinking FTX ship, through the acquisition or merger of two brands – FTX and Alameda Research, both owned by Fried Sam Bankman, the founder of FTX. “Only a common brand can make a difference and perhaps prevent FTX from collapsing.”

A rabbit hole: KuCoin’s CEO says a “hole” has been discovered. He was referring to FTX Reserves. “FTX is trying to fill this gap using its own funds, but the problem is that FTX’s capital is spread across multiple exchanges.”

Learn more: Best Cryptocurrency Exchanges

Lyu pointed out that FTX was trying to withdraw all these funds from several different exchanges. “Smaller exchanges were shocked by the sudden demand for hundreds of millions of dollars in one day,” he said.

“As exchanges transferred their own capital to FTX to fill the hole, their own liquidity reserves were reduced, forcing them to stop withdrawals at the same time,” Lyu added.

Supports Binance: Binance’s sudden liquidation of its FTT holdings was met with suspicion. While some analysts claimed it was a “well-planned” design, others called it “Game of Thrones”. But, Lyu thinks Binance has “also suffered the wrath of the market, and so there is nothing in store,” adding that “the exchange doesn’t need fancy attention or exposure.”

The passage: Following the bankruptcy of FTX and a series of major bankruptcies this year, including Terraform Labs, Three Arrows Capital, Celsius Network and Alameda Research, centralized exchanges have lost people’s trust. In response, Lyu said that the demand for decentralized exchanges (DEX) will increase and transparent exchanges will become the top priority for investors.

Although Lyu thinks the biggest barrier to DEX adoption is that “only tech-savvy users can use it.” In contrast, a platform that is “a mix of DEX and centralized” will be highly reliable.

price action:FTT is currently trading at $1.50, down 31% in the last 24 hours at the time of writing, according to Benzinga Pro.

Read more : Dogecoin Soars, Bitcoin, Ethereum Recover After Inflation Data: Analyst Says “FTX Contagion Risks Remain Elevated”

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