Newsletter #12

Week in review

Developing story: OKEx suspends withdrawals…but is there more to this?

On 16th October 2020 OKEx suddenly announced one of their private key holders (later confirmed to be Star Xu, OK Group’s CEO and Co-founder) is cooperating with a “public security bureau” and is unable to be reached. Therefore the Exchange cannot complete authorisations for transactions and thus decided to suspend all withdrawals of digital assets/cryptocurrencies from 16th October 2020 at 11:00 (HKT).

But is there more to this?

Let’s take a look at some events on 16th October 2020 which may (or may not) be relevant to this:

  • 1:00a.m.: Twitter user @whale_alert tweets: 5,000 #BTC (57,033,847 USD) transferred from unknown wallet to #OKEx
  • 4:00a.m.: Twitter user @whale_alert tweets: 1,180 BTC (13,588,646 USD) transferred from OKEx to unknown wallet
  • 9:00a.m.: Twitter user @whale_alert tweets: 50,000,000 TRX (1,317,074 USD) transferred from OKEx to unknown wallet.
    11:55a.m.: Chinese crypto media platform 非小號 (Feixiaohao) and UAICOIN publishes notices from OKEx that withdrawals will be suspended from 3:00p.m. onwards. This was also reported in a tweet from Co-founder of Chinese crypto media outlet @redtheminer who also notes the rumours circulating in the Chinese crypto community that over 800 accounts from a “certain large crypto exchange” are involved in cross border money laundering.
  • 12:00p.m.: OKEx announcement that it would suspend withdrawals from 11:00a.m. onwards.
  • 1:00p.m.: OKEx finally tweets their announcement on the withdrawal suspension.
  • 2:00p.m.: OKEx CEO Jay Hao tweets, reassures that all other operations are unaffected and that, “The investigation concerns a certain private key holder’s personal issue only. Further announcements will be made.”
  • 2:51p.m.: Someone asks OKEx support “Why is Star Xu’s Weibo page emptied?” and they replied, “The person you are referring to has no relation to our platform”.
  • 3:51p.m.: Twitter user @whale_alert tweets: 998 BTC (11,333,911 USD) transferred from Huobi to OKEx.
  • 10:31p.m.: Twitter user @whale_alert tweets: 3,500 BTC (39,627,432 USD) transferred from OKEx to Binance. They however are suspecting it may be an internal transfer.

*All times are stated in HKT unless otherwise specified.

There are reports from Chinese media that Xu was in fact already arrested a week ago, whilst 2 executives that were also arrested have since been relased on bail. His arrest is causing a stir because he holds the private keys to OKEx’s funds, and according to Glassnode’s data, OKEx holds around 200,000 BTC i.e. USD$2.3 billion worth of Bitcoin.

From the events and how OKEx could have simply made another “less alarming” reason for suspending withdrawals, we have a feeling the Exchange was caught off guard by the events too. Although there are reports that Xu was arrested in relation to matters unrelated to OKEx. In particular it was in relation to funds he had borrowed from a Shanxi-based underground bank for the purposes of the backdoor listing of OKC Holdings on the Hong Kong Stock Exchange in 2019.

In the meantime we can only await further official announcements from the Exchange.

We’ve already mentioned this in our previous newsletter about the KuCoin hack– please take your cryptocurrencies off exchanges and store them offline in a hardware wallet. If you don’t have one yet, please consider getting one. Check out our Ledger Nano X review or buy it here.

For FULL and ONGOING coverage of this incident, check out our article “Developing story: OKEx suspends withdrawals…but is there more to this?”

Potential red flags and rugs of the week

Due to overwhelming positive response, we are bringing back our list of potential issues with DeFi/Yield farming projects. Please note that some of these raised issues are subject to further verification so please do your own research. Here’s what was discussed this week on our Telegram/Discord alone:

  • cVault Finance ($CORE): Not related to the project itself but there is a scam pretending to be an “official” 1,000 CORE giveaway with a fake telegram channel.
  • Decore.finance ($DCORE): The website says that due to a contract bug they have halted the process of adding/withdrawing liquidity from vault. One of our members apparently spoke with a contract auditor who said on an initial review it didn’t seem like anything was suspicious. However, we do note that Coingecko’s page for the project has put up a notice that they have received allegations the team has abandoned the project and asks users to proceed with caution.
  • Fuelswap. finance ($FUEL): Unencrypted network used to connect to your Metamask which could result in loss of funds. Telegram is gone.
  • Justswap.finance ($JUST): Not related to Justin Sun’s justswap.io. This is a virus/malware disguised as an airdrop. The website will take your money and attack your computer with malware injected into the website.
  • Piratetoken.finance: All trades apparently would get 5% pirate tax that gets distributed to 1 holder daily at random when in fact there was no prize. Website can no longer be found.
  • Rabbitwallet.org: You will be prevented from withdrawing and empty your wallet if you approve any spending limit on the website.
  • Seal Finance ($SEAL): Potential code that can allow devs to withdraw tokens from your wallet. Note the Seal finance team have responded that this code is only for their cSeal token farming contracts, and is only for them to help users who mistakenly transfer their assets.
  • Thirm protocol ($THIRM): Initially said their early developer’s wallet was hacked and warned users to remove liquidity ASAP. The Team later clarified that in fact the promotor wallet was hacked and dumped around 2,000 THIRM. New tokens will be created and THIRM holders before the hack would be given the same balance plus 2% bonus tokens.
  • Triangle.finance ($TRI): Website and Telegram disappeared. Twitter only has one post on it from 12th October 2020.
  • Wineswap.finance: Entire contract was emptied within 20 minutes from launch and social media is now gone.

Thank you to CC, Cheatbandit, Coderwongy, madrick8, Ronald Jones, RyGuy31581156 and Lolibutts!

Are DeFi scams ruining yield farming for everyone else?

This week we were interviewed by CoinTelegraph on our views on “Escalating DeFi scams tarnishing the crypto yield farming market niche”. In relation to the topic, we definitely think the recent strings of DeFi scams are seriously affecting the reputation of this field and people’s interest. We also gave our insights on how we try to avoid scams through research, and some of our methodologies.

Filecoin mainnet is finally launched and listed after 3 years

Filecoin ($FIL) was one of China’s hottest projects back in the 2017 Initial Coin Offering (ICO) craze, having raised USD$200 million. At around 3:00pm (UTC) on 15th October 2020 the mainnet was finally launched and exchanges such as Binance, FTX and Huobi, etc rushed to list FIL.

Upon listing, prices for FIL shot up 118%, and this is due to the very small circulating supply at the time- around 0.7% of the total. And at the very early moments of listing, due to the price differences for $FIL on different exchanges such as HuoBi and FTX, some traders were able to take advantage by purchasing a short and a long on each of these exchanges respectively. This was further explained in our livestream on 16th October 2020 (at 5:13 mins). The discrepancy in prices though has converged so this “IQ 200 play” is no longer viable 🙁

As with most new listings, prices dipped after the initial moments of listing. Prices are down 45% but the downward trajectory seems to be slowing down. Currently, prices are still sitting above USD$40.

However, we do question what would happen to prices when another 0.7% of $FIL is released? Also, the fully diluted valuation is USD$136 billion dollars- approximately 4x of Ethereum. Is that realistic?

PlotX Mainnet launch

On 13th October 2020 PlotX ($PLOT) has been launched on the Ethereum Mainnet and listed on Uniswap.

PlotX was one of the most anticipated launches of the last weeks being a decentralized predictions market protocol that lets users guess the future market outcome and get rewarded for correct predictions. Here you can read our article on the project and view Michael’s video with Ish Goel, Co-founder of PlotX.

Making prediction markets easier- PlotX with Ish Goel

As with many times before, the hours preceding the launch have been characterized by fake tokens appearing on Uniswap creating problems for distracted investors. The listing price was USD$0.05 but it spiked to more than USD$1 at the beginning to later start its real discovery price phase. It has so far been stabilizing itself around a more modest 10 cents price.

SWAG Finance (pleasantly) surprises everyone with early launch

SWAG Finance ($SWAG) was offering a decentralised community governance token i.e. $SWAG as a part of Swag.live’s expansion. Swag.live is a popular adult entertainment platform with over 10 million users worldwide. They are currently based in Asia but have plans to expand operations to North America and worldwide.

SWAG launched its First Swap Event at 10:00p.m. UTC on 14th October 2020 which would allow users to swap for SWAG and be entitled to their rewards distribution, known as SQUIRTS.

This launch was hugely successful and according to the Team, SWAG prices shot up 240% upon launch. Whilst prices are no longer at their all-time high, it is still up nearly 3 times compared to launch.

Andre Cronje comes back

A few days ago, Andre Cronje, one of the most famous personalities in crypto as well as one of the best and most genius developers, came out with a new medium article “Unpacking my involvement in DeFi“.

After having disappeared for a while after receiving death threats related to the Eminence ($EMN) episode, when a lot of crypto investors who started speculating and buying into his not-yet-released project ended up losing their money (a hack for a total amount of USD$15 million, 8 of which have then been sent back by the hacker), Andre came back to clarify a few things. Among them:

  • “I do not build to make a number go up”. Meaning that he only wants to build for developers and to enable them to easily create products out of his initial work
  • “Tokens are not stock”, you buy a token to be a contributor of a project, not a bystander
  • “Development process”, where he explains that his famous “test in prod” statement has been misinterpreted and it “exists to deter people from using systems without investigations”.

He then goes on to clarify that he is just a contributor to Yearn Finance ($YFI), not the creator and that he has now stopped using Twitter to avoid further misunderstandings, as long as using his deployer account (that makes his new projects immediately traceable back to him, hence starting the FOMO).

He ends with his personal thoughts about this space, which give him mixed feelings which he doesn’t really know how to express. We also see a lack of trust that is increasing among the community and that lately, we have also heard rumors about a group of DeFi users grouping up and planning to sue him for what happened.

We understand that things are adding up in his mind, creating even more confusion about what the future holds for him.

More and more companies investing in Bitcoin

Bitcoin treasuries in publicly traded companies

The list of Public Companies that use Bitcoin as a reserve asset is growing by the day. In September 2020, we discovered how Microstrategy was able to raise its holdings to over USD$435 Million worth of Bitcoin, and it just showed us once again how Crypto is still nothing compared to traditional finance in terms of numbers. Its CEO Michael Saylor tweeted: “To acquire 16,796 BTC, we traded continuously 74 hours, executing 88,617 trades ~0.19 BTC every 3 seconds”, which translated in roughly $39,414 in BTC per minute.

The last additions to the crypto game have been Stone Ridge, which revealed a USD$115 Million investment (part of a Billion-dollar spinoff), and Square, that invested USD$50 Million. Its CEO, Jack Dorsey, has been known as a Bitcoin supporter for quite some time now.

With all these big names trusting the future outcome of Bitcoin, who are we to doubt their judgement?

DCEP- testing China’s digital currency, lottery style

China’s national digital currency DCEP is now undergoing testing amongst the public in Shenzhen. The government in Shenzhen gave away RMB10 Million in an experiment to test their digital currency, which is not a traditional cryptocurrency as we usually imagine them because it is centralized and under the control of the People’s Bank of China.

Recently, Shenzhen residents were able to sign up for a lottery to get some free DCEP to test out. The lottery was hugely oversubscribed, and only a lucky 2.61% were able to get their hands on RMB200 (around USD$30) of DCEP to spend at designated stores.

If you want to know more about what is DCEP, take a look at our article.

Upcoming events

19 Oct 6:00am: Injective Protocol ($INJ) ticket claim will open on Binance Launchpad. More details here.
19 Oct 2:00pm: Trading opens for CryptoLocally ($GIV) on Bithumb.
20 Oct 8:00am: Winning tickets for Injective Protocol will be announced.
21- 22 Oct: Blockchain Life 2020 (Moscow)
22 Oct: Token sale starts for The Graph ($GRT) for already registered participants.

*All times are listed in UTC unless otherwise stated.

See here for back issues of our newsletter.

The information provided in this article is intended for general guidance and information purposes only. Contents of this article are under no circumstances intended to be considered as investment, business, legal or tax advice. We do not accept any responsibility for individual decisions made based on this article and we strongly encourage you to do your own research before taking any action. Although best efforts are made to ensure that all information provided herein is accurate and up to date, omissions, errors, or mistakes may occur.


Michael
I’ve been involved in the Bitcoin and Blockchain space since 2012. Something I notice right away is that accurate factual information is hard to come by in this space. More often than not, we find extremely biased information that exploit the complexity of blockchain to obscure facts. The objective of this site is simple – to provide independent insights into the blockchain space.

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