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Why the price of bitcoins fell sharply by 3% in 30 minutes when OKEx was frozen

OKEx, one of the largest cryptocurrency exchanges in the world, announced a temporary suspension of withdrawals on October 16. Following the news, the price of Bitcoin (BTC) fell sharply by 3% in 30 minutes on major exchanges.

The nervousness of the market comes from the reason for stopping the download and from the potential consequences it brings.

The 15-minute bitcoin price chart

The 15-minute bitcoin price chart. Source: TradingView.com

OKEx says the private key holder is cooperating with investigators, Bitcoin is falling fast

The OKEx team said that one of the holders of private keys on the stock exchange cooperated with the Public Security Bureau in the investigations. The team said:

“One of our private key holders is currently cooperating with the Public Security Bureau in investigations when required. We are not in contact with the respective private key holder. As such, the associated authorization cannot be completed. Pursuant to 8.1

Modification of the Service and Termination of the General Terms and Conditions, OKEx may change the service and / or may also interrupt, suspend or terminate the service at any time with or without prior notice. “

Immediately after the release of the OKEx statement, the price of bitcoins fell from 11,514 to 11,190 dollars. The drop of 3% occurred within a 30-minute interval, which led to a retreat for the entire market.

Bitcoin exchanges usually apply a multi-signature system for processing cold store withdrawals, ie. a wallet that is not connected to the Internet.

To transfer funds from the cold wallet, the exchange often distributes several private keys to owners and managers. In a multi-signature system, all or most key holders must be present to sign transactions.

In the case of OKEx, the exchange said that one of the private key holders could not approve withdrawals. Jay Hao, CEO of OKEx, said:

“All @OKEx operations except digital asset / cryptocurrency withdrawals remain unaffected. All your funds and assets are safe. The investigation concerns only the personal problem of a particular private key holder. Additional announcements will be made. “

The price of bitcoins fell sharply in the OKEx news for two main reasons. First, OKEx is a major exchange that processes significant amounts of both spot and futures.

Second, when it comes to exchanging ties with China, there is usually heightened market speculation. Red Lee, co-founder of 8BTC, said:

“OKEx’s cancellation will be stopped for the first time at 15:00, but quickly changed to 11:00. It is rumored that more than 800 aka in a “certain” exchange are involved in cross-border money laundering. “

Industry leaders are surprised by the news

Leo Wise, president of the Hong Kong Bitcoin Association, said he was surprised that one person could influence the entire multi-sig system on the stock exchange. He wrote:

“The fact that one person is sitting in China holding the keys to an entire offshore cryptocurrency exchange is perhaps the most surprising thing in this industry that I have learned this year. The fact that customers do not require transparency regarding key management comes in the next second. “

In the case of BitMEX, as an example, when the company’s technical director Samuel Reid was arrested earlier this month, most private key holders were able to unsubscribe from transactions.

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