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Analysts claim exchanges are selling their bitcoin, crypto trading platforms are reacting

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Security breaches and hacks often highlight the risks of storing Bitcoin (BTC) on centralized exchanges. One analyst even claims that keeping your BTC on the exchange is also a factor in price declines.

Rufas Kamau, research and market analyst at Scope Markets Kenya shared his thoughts on how holding BTC on an exchange lowers the coin price. Kamau believes that buying BTC on exchanges is just like buying an “I Owe You” (IOU), which he calls “paper Bitcoin.”

The analyst also points out that exchanges offer many ways to stop BTC from paying out, such as: B. High withdrawal fees. On the other hand, exchanges encourage keeping BTC inside exchanges by offering staking services.

According to Kamau, this is happening because the exchanges are able to sell bitcoin held on the exchanges to other buyers, while the bitcoin IOU holder is happy to continue earning an annual percentage return on their BTC.

Because of this process, Kamau claims that investors who buy BTC and hold it on exchanges incur a deficit, as the process allows exchanges to “print” Bitcoin and when supply increases, the price decreases. He also urged users to keep their holdings off exchanges, which “makes sense if you want to change the world with Bitcoin.”

While many liked and retweeted Kamau’s thread on Twitter, not all agreed with his comments. Twitter user Koning_Marc answered to Kamau, who said his thread was “wild speculation at best”. Additionally, Twitter user Felipe Encinas responded that in this case exchanges could short BTC without having it. Encinas said that this “cannot happen”.

Related: Understanding Staking Pools: The Pros and Cons of Cryptocurrency Staking

Crypto exchanges didn’t deny that this could happen with some exchanges. However, LBank chairman Eric He told Cointelegraph that exchanges adopting the practice will learn a lesson. He explained that:

“The market will teach a lesson to exchanges that sell user bitcoins because they cannot buy back the bitcoins they sell. An exchange like this will certainly fail.”

He went on to explain that the digital asset exchange, which is currently thriving and expanding, is “solid crypto believers.” They are the ones who believe that BTC can reach the $100,000 mark and hence bought BTC instead of doing shady things like selling other people’s Bitcoin.

Binance has commented on the topic. In a statement, a Binance spokesperson told Cointelegraph that exchanges do not have the authority to move their users’ funds without consent. Inside their company, they said they are not taking any positions and that “users’ crypto assets are securely held and held in offline cold storage facilities maintained within the exchange.”