Changpeng Zhao (CZ), the CEO and co-founder of Binance has shared some red flags investors using cryptocurrency exchange platforms should look out for while these platforms declare their proof of assets.
According to the veteran’s words in a recent tweet, large inflows and outflows from exchange-related addresses before or after demonstrating their wallet address is a sign that all is not well with the exchange.
Ideally, centralized exchange platforms are not supposed to move users’ funds outside of the platform’s ecosystem. Platforms that operate properly do not have to constantly move large amounts of funds as this can trigger liquidity risk.
Therefore, CZ has urged users to closely watch the activities of exchange-related wallets. Should they notice any suspicious transactions on the address he advises users to withdraw their funds from the platform and store them in a non-custodial wallet. With this measure, users can avoid their funds being trapped in an exchange platform.
In a bid to boost customers’ confidence after the sudden collapse of rival exchange FTX, CZ’s Binance led the initiative to declare its proof of reserves. The initiative has been followed by other platforms including crypto.com.
As per the snapshot of Crypto.com’s proof of reserve, the exchange transferred over $400 million in different cryptocurrencies to Gate.io – a rival. This action has raised concerns from users but Kris Marszalek, the firm’s CEO has said the transfer was made in error and the funds which represented about 80% of ether in its reserve were supposed to be moved to a new cold storage wallet.
CZ Predicts more Crypto Firms Collapse due to FTX Exposure
Unfortunately, the sudden collapse of FTX, which is arguably one of the largest players in the industry has shaken a lot of consumer confidence in the sector.
CZ, who has taken it upon himself to publicly address concerns about the industry and its players during a conference in Indonesia said FTX’s collapse isn’t the last for the industry.
According to him, owing to the size of FTX, many other crypto firms could suffer a similar fate due to their exposure to the FTX ecosystem. CZ predicts the failure of other crypto firms to make the rounds in the coming weeks.