Claims about liquidity problems at Gateoio and MEXC are increasing day by day, how can this affect the relevant crypto exchanges?
Liquidity, which is perhaps one of the most important items for crypto exchanges, continues to shake the exchanges. Exchanges such as FTX, Bittrex and Hotbit, which could not cope with liquidity problems in the past, announced their performance. When we look today, Gateio and MEXC Global faced allegations that they had this liquidity problem. Where did these claims come from? What problems might await exchanges?
Crypto Exchanges and Liquidity Issue
The term “liquidity”, which is generally used for cryptocurrency exchanges, refers to the mass of investors on the exchange and the trading volume in cryptocurrencies. Cryptocurrency trading takes place in shorter times for exchanges with high liquidity ratio. This provides confidence to the investors in the stock market and allows them to continue their transactions on the platform.
In exchanges with high liquidity level, it is easier to “liquid” the crypto money in the wallet into cash. In addition, since the price range between cryptocurrencies is very low, these transactions do not cause any problems with the indicator prices on that exchange.
When it comes to liquidity problems, it is actually one of the biggest problems that can be experienced for a stock market. Factors such as the fact that the exchange has a very low number of users, that commercial activities take a long time, and that there is not enough reserves in the exchange’s own pool are among the main liquidity problems of the exchanges.
Exchanges Fighting Liquidity Today: Gateio and MEXC
Claims have been made about the popular cryptocurrency exchange Gateio that it has a liquidity problem. These rumors circulating in the market showed that the exchange was connected to a protocol called Multichain and therefore had problems with payment services. Gateio, on the other hand, denied the allegations and stated that the transactions on the stock market continue as normal. In addition, Gateio stated that the platform creation works in Hong Kong are continuing rapidly and emphasized that there is no problem in the middle.
Adding to the liquidity woes, analytical data firm Arkham Intelligence shared data on Gate.io on May 24 showing the inflow of a large amount of Multichain tokens. After what happened, it was revealed that this is related to the rumors that the Multichain team was arrested as the reason. Gate Token (GT), the stock market’s own token, lost 19 percent after this mess.
Another exchange that is in trouble due to liquidity is expressed as MEXC Global. MEXC Global, which stands out with its transaction volume in Memecoins, has had technical problems recently. MEXC users, who stated that the reason for these technical problems is “liquidity” based, created a discussion on social media platforms. There were shares by MEXCGlobal that the rumors were not true. The fact that the discussions about the event could not be clearly connected to the lack of liquidity calmed the atmosphere of the discussion a little bit.
Exchanges with Liquidity Problems in the Past and Their Results: FTX, Bittrex, Hotbit
In the past, many crypto exchanges struggled with liquidity. The most well-known of these were FTX, Bittrex and Hotbit. One thing they all had in common was that they went bankrupt with the loss of liquidity. When we first handled the event by FTX, FTX, known for its support of Solana (SOL), made very serious gains with the participation of both SOL and new investors in the stock market.
But mismanagement and unconscious liquidity operations prepared the end for FTX. FTX, which was once seen as a competitor to Binance, started to stay in the background due to lack of liquidity. This led to the withdrawal of investors from the stock market, the termination of sponsorship agreements with the stock market, and cyber attacks. The chain of events triggered by liquidity woes resulted in the collapse of FTX.
Another crypto exchange grappling with liquidity problems was Bittrex. Opened in 2013, Bittrex made its mark until 2017. The crypto industry, which was not known at the time, was almost revived on Bittrex. In addition, the small number of crypto exchanges at that time made crypto trading more intense on those exchanges. Bittrex, one of these exchanges, lost its popularity over time and fell into the background.
Bittrex, which lost users every month, started to experience liquidity problems. The fact that there were very few users on the stock market was making the buying and selling transactions taking place on the stock market very long. This event further reduced the already low number of users. Bittrex, which could not cope with its liquidity problems, recently announced its bankruptcy.
Another cryptocurrency exchange hit by the lack of liquidity was Hotbit. Hotbit, which once stood out with its trading volume in memecoins, gradually fell out of favor with the addition of new exchanges to the market. Having tried many ways to provide liquidity, Hotbit, which could not succeed, lost users and sponsors all the time.
Hotbit, whose revenues decreased, tried new moves on the subject. However, the inability of these actions to solve the problem made the liquidity problems on the Hotbit side inevitable. Hotbit, which has been used by a significant number of crypto investors in the past years, announced that it would end its activities by publishing an announcement a few weeks ago.
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