The year 2022 has turned out to be a huge curse on the entire cryptocurrency industry. Initially, cryptocurrencies were impacted by the overall market downtrends and economic conditions.
Now it seems that the curse has shifted to cryptocurrency exchanges. It has become a year where so many cryptocurrency exchanges have ended up facing liquidity issues.
The first major negative impact on the crypto industry by a cryptocurrency exchange in 2022 was because of the FTX exchange.
It faced a crash followed by a Chapter 11 bankruptcy, causing almost the entire cryptocurrency industry to bleed in November 2022.
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Even the major exchanges such as Gemini, Binance, and Coinbase are not having a good year. They are all being held answerable for their holdings and reserves following the FTX exchange debacle.
With the FTX exchange’s crash, several cryptocurrency exchanges and lending platforms admitted they had invested heavily in FTX.
They had put away their funds into the FTX exchange that are either gone or are being calculated as part of the bankruptcy.
Initially, the issues were highlighted by the majority of the projects from within the United States. Later, the impact spread worldwide and multiple exchanges ended up going bankrupt or facing liquidity issues.
A Dutch Exchange May Be Facing a Similar Problem
Bitvavo, a cryptocurrency exchange based in the Netherlands seems to be facing a similar kind of problem.
The Netherlands-based cryptocurrency exchange has made an allegation against the Digital Currency Group (DCG). According to Bitvavo officials, they have a huge amount of funds stuck with the DCG.
As per the officials, their €280 million are currently stuck with the DCG, which translates to $297 million. The total funds that the exchange is currently managing are €1.6 billion.
This means that 17.5% of the total funds managed by the exchange are now stuck with the DCG.
Bitvavo’s Statement Sounds Familiar
Despite sharing the deficit that it is currently facing, the exchange officials have claimed they are facing no risks with their business.
According to the officials, the amount being stuck on the DCG platform has no impact at all on their business.
Although the exchange is providing assurances, it has also become a trend for the troubled exchanges and platforms that they make such claims.
This is exactly how the exchanges have begun stating their case in most of the incidents. They first provide assurances that their business is not impacted at all, only to cease withdrawals afterward.
However, there is no telling what the exchange is going to say in the future.
Bitvavo’s Allegations against DCG
The exchange has claimed that the DCG is facing some sort of liquidity problem. The DCG seems to be facing a similar situation as the entire cryptocurrency industry.
The entire industry has been very turbulent and it has gotten to the DCG as well.
As per the Bitvavo officials, it had a repayment program set up with the DCG. However, the firm has reportedly halted its repayments until further notice.
The DCG has notified Bitvavo that they are true, facing a liquidity crisis, and are trying to deal with the situation. Until the situation is not fixed, they will not be able to resume the repayments.
Statement Issued by DCG
On the other hand, the DCG has a claim of its own. A spokesperson at the DCG has claimed that the issue is not from their end but from another major platform known as Genesis.
As per the officials at the DCG, Genesis is their independent subsidiary and it seems to be facing a liquidity crisis. Therefore, they are trying to fix the problem so they can continue with their repayments as usual.
The most interesting part of the entire development is that Genesis itself has paused withdrawals since the beginning of November.
The reason why it was forced to do it is because of the FTX exchange going out of business. It seems that the situation Bitvavo is facing at the moment is because of the FTX contagion.
It is just a heads-up for the investors linked with Bitvavo and the DCG that they must remain cautious at any cost.