Fears grow for crypto.com after FTX collapse and bitcoin price drop

The spotlight is on crypto.com as the crypto exchange’s native token craters and the company denies rumours about a liquidity crisis.

Cryptocurrency exchange crypto.com is in the spotlight after the price of its token cronos cratered as the company denies liquidity problems.

Australian investors are among those pulling funds from the exchange as crypto.com’s native token cronos took a 46.55 per cent dive for the week, a slide of about $1 billion ($US1.49 billion).

The entire crypto industry is on edge after FTX, one of the world’s largest crypto exchanges, suddenly went bankrupt on Friday after a liquidity crisis.

The high-profile collapse of FTX, crypto hedge fund Three Arrows Capital and crypto bank Celsius have dragged down the price of bitcoin, ether and cronos.

The bitcoin price is currently $24,264.98, down 72.76 per cent for the year and ether is $1810.74, down 71.30 per cent.

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The value of bitcoin, ether and cronos plunged in recent months after the high-profile collapses of Three Arrows Capital and FTX.

If you have to say, “I’m not a witch,” it’s not a good sign, and crypto.com has fervently denied liquidity issues as rumours spread about a run.

The Singapore-based exchange’s CEO Kris Marszalek moved to reassure customers that the firm’s balance sheet was “very strong” and its reserves covered all client assets.

“People are depositing, people are withdrawing, people are trading,” he said. “There is pretty much normal activity, just at a heightened level,” Bloomberg reported.

“Withdrawals are being processed as usual. No FUD [fear, uncertainty, doubt] please,” Mr Marszalek wrote on Twitter.

Crypto.com has about 70 million users and had less than $10 million exposure to FTX, Mr Marszalek said.

He has previously stated that the company will release an audited “proof of reserves” to show customers funds are safe.

Crypto.com has made headlines recently for a number of huge blunders.

The company accidentally transferred more than $10 million to Melbourne woman Thevamanogari Manivel last year. She was supposed to receive a $100 refund.

The error was discovered seven months later during a routine audit, which Victorian Supreme Court judge James Elliott this year described as “extraordinary”. Ms Manivel has been ordered to pay back the money.

Matt Damon in a crypto.com advertisement. Picture: crypto.com

And recently the firm revealed it had accidentally transferred and then recovered $595 million ($US400 million) worth of ether.

“It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address. We worked with Gate team and the funds were subsequently returned to our cold storage. New process and features were implemented to prevent this from recurring,” Mr Marszalek said.

But Binance CEO Changpeng Zhao has said there was a “clear sign of problems” at another crypto exchange, apparently in reference to crypto.com.

“If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away,” he wrote.

There’s also a growing movement for “self custody” of crypto assets, the idea that investors should store their crypto in self-custody wallets, without any third party involvement.

CZ wrote recently: “Self custody is a fundamental human right. You are free to do it at any time.

“Just make sure you do it right. Recommend start with small amounts to learn the tech/tools first. Mistakes here can be very costly.”

Investor Ben Armstrong wrote: “I just withdrew all my funds off crypto.com.

“I don’t necessarily think anything is wrong with [crypto.com] … but if you haven’t learned the importance of self-custody by now then there may be no hope for you. Not your keys, not your crypto.”

High-profile accounts have spread rumours about the financial health of crypto.com.

“A potential bank run on crypto.com may be in progress,” one account wrote.

“My crypto.com withdrawal of 2 BTC has been pending for 24 hours … This is not normal,” another wrote.

“Is crypto.com next?” another speculated.

Mr Marszalek, however, was defiant.

“We will just continue with our business as usual and we will prove all the naysayers and there is [sic] many of these right now on Twitter over the last couple of days,” he said during an address streamed live on YouTube.

“We will prove them all wrong with our actions. We will continue operating as we have always operated.

“We will continue being the safe and secure place where everybody can access crypto.”