Mass Withdrawal of Cryptocurrency from Exchanges in China. What is the Problem?
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Investors are massively withdrawing Ethereum from exchanges in China, deleting accounts, and encouraging other users to do the same.
Exchanges have already begun to resist
Users from China are massively withdrawing cryptocurrency from exchanges, local journalist Colin Wu wrote on his Twitter account. He said with reference to the analytical service Cryptoquant that the outflow of funds was recorded from the platforms Binance, Poloniex, Bittrex, Kraken, Kucoin, and Bitfinex.
The data shows that due to the popularity of yield farming, especially the recent sharp drop in the price of ETH, many users buy bottoms on exchanges and then transfer to DEX for farming. The stock of ETH and other farm crypto on the exchange is falling frantically. pic.twitter.com/I6982HMVTL
— Colin Wu（WuBlockchain） (@WuBlockchain) September 7, 2020
According to Wu, this has become a kind of movement in China. Users withdraw cryptocurrency, delete accounts, and encourage others to do the same.
What is the problem with cryptocurrency exchanges in China?
There are two reasons for this. Firstly, over the past week, many sites experienced delays in withdrawing funds and interruptions in work. For example, Poloniex disabled withdrawal three times in September due to problems with Ethereum and Tron wallets and all tokens based on them.
— Poloniex Customer Support (@PoloSupport) September 5, 2020
Another reason is the development of the decentralized finance (DeFi) sector. Wu noted that traders are withdrawing Ethereum the most. Coins are sent to DeFi sites for “profitable farming”. The essence of this strategy is to make a deposit on the platform and receive a percentage on it in another cryptocurrency, that is, “harvest”.
Wu clarified that the impact of the move to withdraw funds from exchanges is still difficult to assess, but companies have already begun to defend themselves. While users are taking Ethereum to enter the DeFi market, marketplaces are listing assets from this sector and creating similar instruments, thus trying to attract traders back. For example, Binance launched the Launchpool product on September 6. It allows customers to deposit BNB, BUSD, and ARPA tokens into the pool, in order to then participate in the distribution of coins of the Bella protocol project.
The reason for the high popularity of the DeFi sector is the high interest rates on deposits. The annual profitability in the early days of launching such services is often thousands of percent, although this figure decreases over time due to the influx of users.
For example, in early September, a trader at High Stakes Capital reported that he was making about $ 160 per minute from “profitable farming.” However, this strategy is extremely risky. Often, DeFi platforms are launched without passing a code audit, which is why they can break on the second day of work. This is what happened with the Yam app.
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