Digital Currency Group and its subsidiaries (DCG), which manages $296.7 million (280 million euros) in deposits and digital assets from cryptocurrency exchange Bitvavo for off-chain staking services, suspended redemptions citing liquidity problems. in the middle of the bear market. However, Bitvavo announced that it would pre-finance the locked assets, avoiding DCG-induced service disruption for users.
Now that users are proactively exploring self-custody options as a means of safeguarding their funds, an acute liquidity crisis is expected to loom over exchanges. DCG claimed liquidity problems by suspending redemptions, temporarily preventing users from withdrawing their funds. Bitvavo, for its part, decided to pre-fund the locked assets to ensure that none of its users would be exposed to DCG’s liquidity problems.
“DCG’s current situation has no impact on the Bitvavo platform,” the statement read, while the company guaranteed that service to its users would not be interrupted. According to Bitvavo, DCG intends to share a plan to repay outstanding deposits over time.
In addition, Bitvavo maintains that DCG’s debt will not have any negative impact on its day-to-day operations, as the company “has been making a profit since its inception and is in a strong financial position.” The company also ensured the status quo even if DCG did not fulfill its part of the bargain.
Bitvavo manages almost 1.7 billion dollars (1.6 billion euros) in deposits and digital assets, which are held 1:1 and are fully redeemable by users.
Due to the massive outflow of funds from exchanges, Binance – the cryptocurrency exchange with the highest trading volume – suffered a drop in liquidity.
Binance Netflow 7D ($) -3,660,311,347
8,783,380,428 – Outflow
5,123,069,081 – Inflow
Exchange Flows dashboard ⤵️https://t.co/CYrBQLryQ0 pic.twitter.com/vV6vcqoWKK
—Nansen (@nansen_ai) December 13, 2022
According to Andrew Thurman, a technician at Nansen, the drop in liquidity may have been partly due to the departure of large market makers from the exchange.
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