Are Cryptocurrency Exchange Outages Attempts to Defraud Users?
Cryptocurrency exchange outages are becoming commonplace. More infuriatingly though, outages only ever seem to occur during times of peak trading volumes. Each time this happens, this results in traders missing opportunities to offset losses during major market corrections.
As a result of a 44-minute outage on BitMEX on Marc 13th, some traders are planning to quit the platform. The only question is, are cryptocurrency exchange outages purposeful attempts to defraud users?
Recent Cryptocurrency Exchange Outages Stir Controversy
Over the course of the past week, the cryptocurrency markets have lost over $50 billion in value. However, individual investor losses have been made worse by popular cryptocurrency exchange outages.
Between March 9th and March 12th, outages of the stock and cryptocurrency investment platform Robinhood, saw thousands of users unable to access their portfolios for several hours. Coincidentally, these outages also all took place during major Bitcoin corrections.
- Recent Robinhood outages have given rise to calls for a class-action lawsuit against the platform.
- Binance temporarily suspended withdrawals on March 12th, citing ‘wallet maintenance’ as the reason.
- Binance also deleveraged BTC/USDT trading pairs on March 12th. As a result, exchange users could not park Bitcoin profits in stable coins to protect their funds.
- An outage on BitMEX later prevented users from accessing their portfolios. However, during the outage BitMEX itself was still able to trade against user positions.
Trust in Exchanges is at an All-Time Low
Conveniently timed cryptocurrency exchange outages always result in traders finding it impossible to exit the market during price pullbacks. However, several exchanges have also recently come under fire for abusing user deposits.
In February, Tron foundation CEO Justin Sun bought the popular decentralized social media platform Steemit. This saw Justin Sun simultaneously acquire 40% of all Steemit governance voting power.
To prevent Sun from exercising his new power, the Steemit community enacted a soft fork to freeze all Steem funds that were previously intended for development purposes only.
Later, to reclaim control of Steemit, Justin Sun began asking Binance, Huobi, and Poloniex, to use Steemit user funds deposited on their exchanges to vote to restore his governance rights. All three then began to do so.
The Steemit Takeover That Wasn’t
When Steemit users became aware of how their funds were being used by exchanges, Binance, Huobi, and Poloniex received significant backlash. All three have, therefore, since made an apology to the Steemit community. However, the fact that exchanges can appropriate user funds at will is worrying.
How to Stay Safe When Using Exchanges
Cryptocurrency exchange outages are nothing new. Sadly, as centralized private corporations, there is little that exchange users can do to hold exchanges to account. However, traders and investors can choose to use alternative platforms.
Sadly, no decentralized exchange offers the full suite of tools professional traders are accustomed to. However, most DEX platforms can capably serve the needs of capable amateur traders.
For those people who are holding funds on exchanges without trading, it is common practice not to do so. Instead create a wallet, most of them are free. It takes 2 minutes. If anyone needs help with a wallet and would like to make a purchases or a sell from us contact us.
The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
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