The Digital Currency Group and its affiliates (DCG) cited liquidity problems as it suspended repayments, temporarily halting users from withdrawing their funds.
The Digital Currency Group and its affiliates (DCG), which manages $296.7 million (280 million euros) in deposits and digital assets of crypto exchange Bitvavo for off-chain staking services, suspended repayments citing liquidity problems amid the bear market. However, Bitvavo announced to prefund the locked assets, preventing DCG-induced service disruption for users.
With users proactively exploring self-custody options as a means to safeguard their funds, an acute liquidity crisis is expected to loom over exchanges. DCG cited liquidity problems as it suspended repayments, temporarily halting users from withdrawing their funds. Bitvavo, on the other hand, decided to prefund the locked assets to ensure that none of its users are exposed to DCG liquidity issues.
“The current situation at DCG does not have any impact on the Bitvavo platform,” read the announcement as the company guaranteed no service disruption to its users. According to Bitvavo, DCG intends to share a plan for reimbursing the outstanding deposits over time.
Moreover, Bitvavo maintains that DCG’s debt will have no negative impact on its day-to-day operations as the company “has been making a profit since its inception and is in a financially solid position.” The company further reassured the status quo even if DCG failed to keep their end of the bargain up.
Bitvavo manages nearly $1.7 billion (1.6 billion euros) in deposits and digital assets, which are held 1:1 and fully redeemable by the users.
Related: Bitcoin takes liquidity near $17K as US dollar shows weakness pre-CPI
Owing to the massive outflow of funds from exchanges, Binance — the crypto exchange with the highest trading volume — suffered from a decline in liquidity.
Binance Netflow 7D ($) -3,660,311,347
8,783,380,428 – Outflow
5,123,069,081 – Inflow
Exchange Flows dashboard ⤵️https://t.co/CYrBQLryQ0 pic.twitter.com/vV6vcqoWKK
— Nansen (@nansen_ai) December 13, 2022
According to Nansen technician Andrew Thurman, the drop in liquidity may have been partially caused by large market makers exiting the exchange.