The OKEx black swan is hard to beat the general trend. After the withdrawal is suspended, how much will Huobi and Binance be affected?
On the morning of October 16, 2020, OKEx, one of the "three major" exchanges in the digital currency field, made a shocking announcement in the industry. In the announcement, the world's leading exchange announced the suspension of withdrawals. Please note that this is not a withdrawal of individual currencies, but a complete suspension of all digital asset withdrawals is rare in the entire industry, so not only OKEx users, but the entire industry are talking about it.
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What is a private key? How to distinguish the hot and cold wallets of the exchange?
Usually, the exchange adopts a “separation of cold and hot” digital currency management method. The “hot” here is the hot wallet. These wallets are always connected to the Internet, responsible for collecting the digital currency charged by users, and also provide users with currency withdrawal services. Usually, when a user initiates a withdrawal application, the exchange will conduct relevant review work, and then withdraw coins from the hot wallet in batches. For Bitcoin, dozens or even hundreds of user withdrawals will be completed in one transaction at the same time. Coin demand, efficient day-to-day operations.
However, due to the long-term connection of the hot wallet and the online services surrounding the hot wallet, it has also brought security risks to it, and has become an important target for hackers to attack exchanges.
Previously, in the 7,000 BTC theft incident in Binance, the stolen bitcoins came from Binance’s hot wallet, but why didn’t all Binance’s bitcoins be stolen? "Just" 7,000 stolen? The reason is that exchanges usually store large amounts of digital assets in their cold wallets. Such wallets are offline most of the time, making it difficult for hackers to attack, which naturally ensures the security of their assets. For example, the current Bitcoin "rich list" The number one address is Huobi’s cold wallet, which stores more than 200,000 bitcoins, which is usually a reflection of the exchange’s strength and solvency.
The situation of OKEx at that time was likely to be that, based on its internal hot and cold wallet management mechanism and risk control-based authorization mechanism, in the overall or part of the digital currency business process, it was necessary to master some wallets, especially cold wallet private keys. Authorization by personnel, but these authorizations cannot be carried out normally, so the withdrawal business has to be suspended.
OKEx also revealed the reason half-covered in the announcement, that is, the person in charge of the private key of the digital currency cooperated with the police to handle the case and could not authorize it. People in the industry can naturally guess some clues. For this exchange, who else can know enough to stop the important business of the exchange? Subsequent news also verified this guess.
As soon as the coin withdrawal incident happened, it seemed “clean” to OKEx, and the coins could not be withdrawn. Naturally, no one dared to deposit coins. An episode in the middle was caused by a wrong label on an on-chain data service provider. The news of OKEx’s large Bitcoin transfer caused an uproar in public opinion for a while, so that OKEx had to clarify it many times.
When OKEx was struggling in the center of the vortex, the entire industry was not calm, and people turned their attention to the other two of the big three: Huobi and Binance. When OKEx is in trouble, will these two exchanges be okay?
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Huobi and Binance’s bitcoin flow changes after OKEx suspends withdrawals
In fact, on the day of the incident, we paid close attention to the on-chain transactions of Huobi and Binance. At that time, there was a rapid increase in the outflow of bitcoin from the two exchanges. At the same time, the price of digital currencies also experienced a short-term general trend. However, the impact of such a black swan event on the market as a top exchange is still obvious.
However, this situation only lasted for half a day. The data of the two major exchanges began to return to normal the next day, and the market quickly got rid of the impact of this incident. Mainstream digital currencies such as Bitcoin and Ethereum also returned to normal. Back to the upward market that had already started at that time. Next, we reveal this process from the dynamic changes of data on the Bitcoin chain.
First, let’s look at the most direct data, that is, the bitcoin inflows of Huobi and Binance exchanges from one week before the incident to this Friday, that is, one week after the incident. The specific date is from October 10 to 10. 23rd.
From the perspective of Huobi Exchange, it is clear that the inflow of Bitcoin on October 16, that is, Friday, did not cause users to worry too much about depositing money into Huobi because of the incident at noon that day, and the amount was also at the forefront of the week . Since then, the inflow has begun to decline, but it should be noted that October 17 and 18 are Saturdays and Sundays, which belong to the regular and normal inflow decline period of major exchanges. In the following week, it was clear that the Bitcoin inflow into the exchange entered a rapid upward trajectory, reaching a recent high on the 21st.
Judging from the year-on-year comparison between the week of the incident and the following week, the year-on-year data for the few days after the incident declined from Saturday to Monday, but rebounded rapidly after that, especially on Wednesday and Thursday.
According to the final data, the Huobi exchange inflowed 41,729.561 BTC from October 10 to October 16, and 45,362.6906 BTC in the following week, an increase of 8.7%.
Here we also need to add a background, that is, there was a trend of net outflow of bitcoins in centralized exchanges for a long time before. One of the reasons is the impact of Defi's popularity, especially the bitcoin pledge business has absorbed a large number of bitcoins from exchanges. currency. However, entering October, Defi-related tokens plummeted, which also reduced the popularity of this field. At the same time, the prices of mainstream currencies such as Bitcoin and Ethereum have risen, and there have been signs of the return of related digital currencies to exchanges. Judging from the situation, the black swan event of OKEx’s suspension of withdrawals has caused a certain impact, but it has not affected the direction of this general trend.
The trend of Binance is roughly similar. There was no major change on October 16. The decline in the next two days was due to the aftermath of the event + the weekend effect, and then the same rebound. One of the major drivers was the price of Bitcoin in the past week.
From a year-on-year perspective, it is clear that the general trend has completely outperformed the black swan. Under the upward trend of bitcoin prices, investors are more willing to put bitcoins on centralized exchanges for efficient transactions.
Judging from the outflow of Bitcoin, on the day of the incident on October 16, both the two major exchanges saw a significant rise, but this trend only lasted for one day, and the panic was quickly overwhelmed by the following Saturday and Sunday. Digestion, the amount of outflow dropped rapidly.
In the second half of the last week, the outflows of the two major exchanges rose again rhythmically. The reason is that the new round of Bitcoin market will inevitably cause the overall amplification of the two directions of Bitcoin inflow and outflow, which is a normal fluctuation.
At the same time, judging from the situation in the past two weeks, Huobi and Binance faced OKEx’s suspension of withdrawals, and there was no great difference in the performance of users in terms of withdrawals. Especially with the arrival of the bitcoin market in the past week, the two exchanges The overall trend of the exchange shows a trend of convergence, which shows that the previous speculation that the incident may trigger a large-scale withdrawal of coins from domestic exchanges to foreign exchanges is not valid.
On the whole, the background of OKEx’s suspension of withdrawals is the general trend of mainstream currencies such as Bitcoin returning to exchanges brought about by the ebb of DeFi and the rise of mainstream currencies. At this time, the black swan event that occurred in a large exchange like OKEx did have a certain short-term impact on Huobi and Binance’s user deposits and withdrawals, especially the performance of withdrawals on the day of the incident was obvious. However, it can also be seen from the trend of the data that this impact is short-term. The temporary black swan event may have an impact on the market, but in the end it is the general trend that determines the direction of the market. Both of the two major exchanges will have on-chain transactions in the next week. amount of improvement.
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How should users respond to black swan events in the future?
So, for users, how should they deal with similar black swan events? Our suggestion is:
1. It is still preferred to store and trade your digital currency on the top large exchanges. They have strong solvency, good reputation, and proper security measures. The risk of running away and bankruptcy is much lower than that of small and medium-sized exchanges. In fact, OKEx’s suspension of withdrawals reflects from another perspective that it has relevant permissions and a series of risk control mechanisms within it, which can better ensure the safety of users’ assets, but these mechanisms can also cause embarrassing situations under special circumstances.
2. Pay attention to the decentralized management of assets, that is, "don't put all your eggs in one basket". According to the business characteristics of different exchanges and your daily use needs for related digital assets, you can disperse and store digital assets in Huobi and other big exchange.
3. For digital assets that will not be traded in the long run, store them in your personal wallet address, but please keep the private key or mnemonic properly, because once lost, it cannot be retrieved. In contrast, centralized exchanges are safer. After all, your real name information can be verified, and even if you forget your password, there is a process to solve it.
4. Don’t be influenced by the so-called "regional" views of exchanges. In fact, some international exchanges have not obtained compliance licenses in many countries. There is no way to talk about protecting your own rights and interests.
