Denis Fedotov, A2ICO's CMO, shared his opinion concerning "the 5 worst cryptocurrency exchanges of 2018" with ihodl.com. You may check it below.
The past year was a real test for projects focused on the cryptocurrency sector. The legendary investor Warren Buffett usually says “the tide will show who bathed without panties” — and the cryptocurrencies’ value fall plus the collapse of the ICO market showed exactly which players were able to prove themselves in the long term and which were not, as the following five crypto exchanges.
One of the most striking failures of 2018 was the Taiwanese exchange Cobinhood. The company raised $15 million during its ICO in 2017, promising the development of a commission-free platform and the active use of its tokens in its ecosystem. However, investors who trusted it became victims of the classic pump and dump scheme: first, its tokens quotes were artificially changed more than 40 times (on its capitalization peak the project exceeded $300 million) and then the token price fell more than 100 times during the year. Today its token costs less than 20% of its initial price.
And it does not end here. The exchange shows complete degradation also in terms of leadership: its founders switched their attention to the next “fashion venture”, trying to sell the DLT Dexon, probably the hundredth in a series of such projects (and, again, raising money — this time already $60 million).
Also, the quotation lists of the exchange were very indicative: at an initial stage, the platform provided the listing of almost a hundred little-known coins — however, already in the autumn, all these fake tokens were removed from circulation. Being impossible to sell, naive buyers were forced to keep those illiquid assets.
In February 2018 the BitGrail exchange informed the crypto community about the theft of 17 million Nano XRB tokens. A number of “unconfirmed transactions” involved the loss of more than $170 million. More, the stolen tokens represented a significant proportion of the total quantity traded in the market. Subsequently, the exchange declared bankruptcy.
Francesco Firano, its owner, said that the other currencies on the exchange’s accounts were not affected. The theft, in his opinion, occurred due to an error in the blockchain of the cryptocurrency itself. In turn, representatives of Nano shared that the theft took place due to previously undetected loopholes on the exchange itself.
On the beginning of 2018 hackers infected the computers of Coincheck employees with a virus, which allowed one of the largest thefts in the crypto-currency world. The “infection” resulted in the theft of NEM tokens worth more than $548 million.
In the meanwhile, digital security specialists found that the virus entered the system through an infected e-mail message, opened by one of the exchange’s employees. Trading on the crypto exchange was immediately ceased — to find out the reasons and eliminate the security breach. However, given the prevalence of cryptocurrencies in Japan, it is not surprising that more than 260,000 investors suffered with the theft.
Bithumb and Coinrail, South Korea
In June 2018 the Bithumb cryptocurrency exchange lost the total of $32 million — a scandal that caused a strong reaction in the media. As a result, the exchange suspended its operations. The victims were promised compensation and Bithumb shared it would move its clients funds to a special cold storage wallet, less vulnerable to attacks.
The Coinrail exchange was also hacked, losing the ICO tokens of a number of projects, including NPXS, Aston X and relatively liquid Dent and Tron in the amount of $40 million. Coinrail did not share how it intended to compensate its investors.
Russian exchange WEX, heir of the BTC-E exchange, has carried out a powerful and multi-stage operation to withdraw funds from its customers. The exchange’s financial problems began in July and some time later the message that “Wex exchange would be closing soon” appeared on various forums. "The situation got out of control" was the reason for the exchange’s closure.
The volume of customer losses on BTC-E and WEX was estimated in more than $100 million.
Disclaimer: the opinions expressed in this text belong solely to the author.