First Mover: OKEx Private Key Snafu Sends Bitcoin Lower as China DeFi Rises

OKEx withdrawal suspension sends bitcoin lower, China becomes hotbed of DeFi development, Filecoin first-day trading leaves market cap above $800M.

AccessTimeIconOct 16, 2020 at 1:04 p.m. UTC
Updated Sep 14, 2021 at 10:10 a.m. UTC
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Bitcoin (BTC) fell 2% Friday, the most in three weeks, after the market was spooked by the announcement that the cryptocurrency exchange OKEx had suspended withdrawals because founder Mingxing "Star" Xu was reportedly taken into police custody. 

The executive is the holder of a private key needed to authorize withdrawals, and that became impossible since he was out of touch, the exchange wrote in a notice published early Friday morning. Officials with OKEx, which is based in Malta but led by Chinese executives, said the issue involved a personal matter, not the exchange and shouldn't affect ongoing business. 

Traders said the price impact might be short-lived. “I don’t think this news colors BTC the wrong way as much as it does the venue,” Vishal Shah, a trader and founder of the Alpha 5 exchange, told CoinDesk.   

Market moves

Decentralized finance, or DeFi, is one of the hottest trends in the crypto industry. So it’s not surprising the DeFi craze would find its way to China, which has an active cryptocurrency community despite government restrictions on trading and token sales.

Chinese startups are playing a crucial role in the DeFi boom with highly localized and nimble adaptations of western projects as well as a marketing apparatus that is laser-focused on Chinese crypto communities, industry watchers say. 

From July through the middle of October, the number of searches for DeFi has soared on China’s social media platform WeChat. It has almost doubled during this period of time, according to WeChat Index, a data analysis tool that includes keyword searches, articles and forwards in WeChat moments. 

Major Defi projects such as NEST, DForce and YFII, all with huge Chinese followings, have raised millions of dollars in the span of a few weeks and topped the TVL ranking on DeFi Pulse.

China often has a reputation for adapting western products to local markets, or in some cases mimicking them. Compound alleged China-based DForce “stole” its code and Chinese liquidity mining site YFII cloned another foreign-based project, Yearn.Finance (YFI).

“Admittedly, many Chinese projects copy code from western DeFi pioneers such as the liquidity leader Yearn.Finance and decentralized exchange UniSwap,” Nervos co-founder Guoning Lü told CoinDesk. “However, Chinese companies are making innovations in localizing the original products and that is what makes DeFi products more popular in the country.” 

- David Pan

Read More: How the DeFi Craze Made Its Way to China

The term "DeFi" has received an inordinate amount of interest over the past two months.
The term "DeFi" has received an inordinate amount of interest over the past two months.

Bitcoin watch

Bitcoin hourly price chart showing timing of OKEx-induced drop, along with daily price chart showing support level.
Bitcoin hourly price chart showing timing of OKEx-induced drop, along with daily price chart showing support level.

Bitcoin is down but not out and unlikely to see a price crash due to the announcement that the digital-asset exchange OKEx had suspended withdrawals.

The cryptocurrency is currently trading near $11,300, representing a 2% decline on the day. Prices fell from $11,519 to $11,231 in the 30 minutes to 04:30 UTC, roughly in line with the timing of the exchange's announcement, according to CoinDesk's Bitcoin Price Index.

OKEx announced an indefinite suspension of withdrawals, saying one of its private key holders was cooperating with police in investigations and thus being out of touch. As per latest reports, that private key holder is the exchange's founder, Mingxing Xu.

As such, the market sentiment may remain weak for some time, although a price crash looks unlikely.

“I don’t think BTC will necessarily dive from here,” Denis Vinokourov, head of research at London-based prime brokerage Bequant told CoinDesk. “The fund flow may look for venues that are based in countries with clearer regulatory stance and policy outlook.”

Besides, the cryptocurrency has recently absorbed bigger shocks like BitMEX's indictment by U.S. regulators, President Donald Trump's health scare and the fiscal impasse in the U.S.

With prices holding above the former resistance-turned-support of $11,200 (Sept. 18 high), the immediate bias remains bullish. The cryptocurrency could revisit Asian session highs above $11,500 as U.S. stock futures are point to a potential reversal of this week's risk-off mood.

- Omkar Godbole

Token watch

USD coin (USDC): Dollar-linked stablecoin gets added to Stellar blockchain

Filecoin (FIL): Decentralized data-storage and content network starts long-awaited distribution of tokens following $200M initial coin offering in 2017. As of Friday, prices had stabilized around $55, for a market capitalization around $840 million, according to CoinGecko.   

Chart showing first-day trading action in Filecoin's FIL tokens.
Chart showing first-day trading action in Filecoin's FIL tokens.

What's hot

Coinbase's global marketing head latest to join mass exit (CoinDesk

Bittrex Global offers 3x leveraged digital tokens on bitcoin, ether and cardano. (Bittrex Global)   

Central-bank digital currencies could "accelerate the velocity of money" and have the "potential to become an inflation game changer," bond firm DoubleLine says (DoubleLine releases "EOSIO for Business" to target enterprise blockchain (CoinDesk

U.S. charges 6 with laundering Mexican drug cartel cash using crypto and casinos (CoinDesk


The latest on the economy and traditional finance

IMF's Georgieva says U.S., China need to keep up coronavirus stimulus to speed economy's recovery (Reuters

Carmen Reinhart, World Bank chief economist and author of "This Time is Different," said there's growing risk of a financial crisis (Bloomberg

French carmaker Renault draws down part of 5B euro government-backed loan (Reuters

Lingering coronavirus concerns hit investor sentiment for Asian traders on Friday (Reuters)

U.S. weekly jobless claims unexpectedly rise to 898K, versus expected 825K and pre-pandemic norm around 200K (Bloomberg):

Initial U.S. jobless claims have leveled off at four times the pre-pandemic norm.
Initial U.S. jobless claims have leveled off at four times the pre-pandemic norm.

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