FTX’s downfall urges crypto exchanges to ramp up their user protection efforts.
Nansen, the blockchain analytics company, has recently conducted a new report, which revealed that after the collapse of FTX, the majority of prominent cryptocurrency exchanges formed user protection funds.
The report, released on June 14th, highlights that combined crypto exchanges such as Binance, OKX, and Bitget hold $2 billion in protection funds.
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Furthermore, the study divulges that Huobi has secured its insurance fund with collateralization of 20,000 Bitcoin (BTC), and Coinbase provides up to £150,000 ($189,140) in insurance coverage to its UK clientele. Nansen’s research team stipulates:
Proof of Reserves should become the minimum standard in the exchange industry, However, as stated above, these are both positive indicators for an exchange but do not guarantee its solvency.
In terms of trading volume across both spot and derivatives sectors, Binance retains the leading position. In May, the crypto exchange held a remarkable 69% share of the overall spot market and recorded a monthly trading volume of $209.5 billion.
Meanwhile, in the aftermath of FTX’s collapse, Kraken observed the most significant surge in spot market trading volume, growing by 14.35% to reach $18.9 billion in the six months compared to the previous half-year period.
On the other hand, Bitfinex experienced the most substantial drop in trading volume, falling by 59.5% to $5 billion over the same timeframe.
When examining crypto derivatives, all crypto exchanges registered declines following the downfall of FTX, with the exception of Bitget. This exchange saw its average six-month trading volume sequentially rise by 4.85% to $204.1 billion.
According to the Nansen researchers, Bitget, Bybit, and Binance were noted to have survived the FTX collapse relatively well. Yet, the researchers also issued a cautionary note that the current regulatory uncertainty in the United States poses a potential hurdle to the growth of these crypto exchanges:
The SEC Chair Gary Gensler has posited that nearly all tokens are securities. This has prevented many exchanges from operating in the US. If the US takes this official position, it could cause significant issues throughout the world for CEXs. It will be worth carefully monitoring the position taken here.
The aftermath of the FTX collapse has prompted crypto exchanges to shore up their user protection mechanisms, committing a combined $2.5 billion to safeguard funds.
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