This year has thus far offered one compelling case after another on the importance of “not your keys, not your coins”. The latest episode in the crypto lending meltdown is Singapore-based firm Hodlnaut, which yesterday announced it was halting withdrawals:
Crypto Lending Market Uncertainty Continues
According to the announcement, the firm has frozen withdrawals, deposits and token swaps due to “difficult market conditions”. When asked about whether it was exposed to the collapse of Celsius and Three Arrows Capital, it referred to an earlier Twitter thread claiming it wasn’t:
While the company indicated it would provide users with an update by August 19, the official announcement offered little in the way of details as to how the liquidation crunch arose, saying only that its focus was on “stabilising our [its] liquidity and preserving assets”. It isn’t clear at this stage how much is at risk, although Hodlnaut claims to have US$500 million of assets under management.
Some Users Saved by Twitter Detective
Even though the rallying cry of 2022 has been to remove all coins from exchanges into self-custody, many have continued to rely on third parties for custodial services. Of course, it goes without saying that not all custodians are created equally, and that users need to do their due diligence to weigh up the relative risks and benefits of leaving coins on exchanges.
One Twitter user who became famous for calling out the Terra ecosystem implosion specifically called out Hodlnaut for its “CeFi degeneracy” in June:
The Twitter thread provides a revealing take on the mechanics of the inherent risks of earning yield on one’s crypto, and unfortunately for the majority of users they are unlikely to have either come across or heeded FatMan’s timely warning. Fortunately for others, they managed to withdraw their investments in time:
Since the announcement, the company’s co-founder has gone offline, with many users viewing this as the ultimate clear signal that they should probably manage their expectations in terms of receiving any of their funds back:
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