More than 29,300 bitcoins ($ 498 billion) left OKEx on Thursday after the cryptocurrency exchange resumed withdrawals that it had suspended for six weeks. The figure is the largest exodus of crypto assets that has been observed on the platform since March when the stock markets collapsed after the declaration of a pandemic by COVID-19.
Data from blockchain analytics tool Glassnode shows that during the significant asset outflow on OKEx, there was also a deposit of 21,600 BTC. The withdrawals and deposits together had a depreciating effect on the exchange’s overall balance, which dropped to about 212,000 bitcoins. The figure is significant if one takes into account that on October 31 there were 200,000 bitcoins blocked on the exchange.
According data analysis firm CryptoQuant show that OKEx’s bitcoin reserves suddenly fell off a cliff, even dropping to roughly 6,000 bitcoins, before showing a slight recovery. The reports also show that the BTC withdrawn from OKEx would have entered other exchanges, mainly Binance, Huobi and Bitfinex, which on November 26 recorded considerable income.
The bitcoin reserve fell sharply on November 26 when OKEx resumed its withdrawals, after a 41-day suspension. Source: CryptoQuant.
OKEx suspended the withdrawals on October 16 claiming that one of the holders of the service’s private keys was “cooperating with a public security bureau where he was required.” The owner was later identified as the founder of the platform, “Star” Xu. The latter later claimed on a WeChat channel that the investigation in which he was involved related to the purchase of LEAP Holdings, a company listed on the Hong Kong Stock Exchange.
According to Chinese reporter Wu Blockchain, OKEx bought LEAP Holdings to be listed on the Hong Kong stock exchange. However, questions arose about the millions of dollars “Star” Xu raised to buy the company. No further details were provided.
OKEx said in a statement last week that it was confirmed that OKEx was not involved in fraudulent or illegal activities, and that the owner of the private key had rejoined its activities. He also denied that company executives were being criminally detained by the police, which they classified as “a rumor without roots or leaves.”
OKEx’s desperate attempt to retain its users
After all the inconvenience that paralyzed the withdrawals from the exchange, OKEx promised launch a compensation and rewards program to express gratitude and convince clients to stay. This program includes one-time payments in proportion to the balances that users maintain, discount cards and incentives for fares every Friday starting in December. Taking into account that there was also a certain volume of deposits on Thursday, that may suggest that the exchange’s promises have convinced many users.
In a statement, the OKEx team said on Friday that, although it has an extensive backup mechanism to guarantee the activation of private keys in the event of long-term disability, such as death or memory loss of their holders, had not taken into account other specific scenarios, such as the headlines becoming inaccessible due to unforeseen circumstances. Around this he promised to take action.
“We are working hard to restore user trust and will launch a solution to improve our internal processes so that we can do our best to prevent this type of situation from occurring in the future.”
Jay Hao, CEO of OKEx.
Some comments on Twitter associated the events of OKEx with fluctuations in the price of bitcoin. This is because the meteoric rise above USD 19,000 would have been maintained during the suspension of withdrawals from the platform, which allowed many to speculate that it was due to a greater shortage of the circulating supply of coins that would have been blocked.
However, other market watchers don’t see a compelling reason to link bitcoin prices to the exchange’s troubles. A CriptoNoticias post states that there is no strong evidence to support the impact of such news on the bull cycle. According to Coin Metrics metrics, it can be seen that institutional investment has had more weight in the rise in prices.