On its Earn page, KuCoin has been promoting annual percentage rates (APRs) of 233.15% on deposits of Ethereum, 253.28% on Bitcoin, and 100% on Tether.
There was a point when it seemed like the best strategy to stimulate the adoption of cryptocurrency yield products was to offer sky-high annual percentage rates on those products. That period of time is now history.
The cryptocurrency exchange known as KuCoin is coming under fire this week due to the fact that its KuCoin Earn page advertises annual percentage rates (APRs) of 233.15% on Ethereum, 253.28% on Bitcoin, and 100% on Tether deposits. Although it is stated on the website of the company that the Tether (USDT) rates are a part of a promotion, the ETH and BTC rates shown coincide with an advanced product called KuCoin Earn that is a “dual investment.”
According to an interview, all of the attention has caused the 24-hour volumes on the exchange, which were $640 million yesterday, to increase to $862 million today, making it the sixth-largest centralized exchange by normalized volume.
On Crypto Twitter, this has caused some eyebrows to be raised, and some defenders have responded by calling the criticism FUD (Fear, Uncertainty, and Doubt) (a crypto-native acronym for fear, uncertainty, and doubt).
Dual investment products are a type of derivative that enable customers to make initial deposits of funds in one currency, such as BTC, and then make withdrawals of those funds in another currency, such as USDT, at a later time when the contract has expired and must be settled.
Because of the potential for a significant level of loss, they typically have very high-interest rates. This is due to the fact that it is not a principally protected commodity. Therefore, rather than only obtaining a poor return on the funds that were deposited or getting nothing in return at all, investors risk receiving less money than they initially invested. It is for this reason that skeptics of these goods, like Scott Lewis, co-founder of DeFi Pulse, refer to these types of schemes as “predatory.”
Users were thrown off by the fact that the product was released on Wednesday; they believe that this was done in an effort to attract additional deposits to the exchange. After issues began to arise for the company that is now defunct FTX at the beginning of the month, CEO Johnny Lyu stated on Twitter that “Protecting user funds is the first priority at KuCoin.” In approximately one month, we will publish Merkle tree proof-of-reserves, also known as POF.
On November 11, the same day that FTX filed for bankruptcy, KuCoin disclosed the balances of some of its wallets along with their addresses. However, the company has not yet submitted an audit that was conducted by a third-party accounting firm. While everything is going on, DeFi Llama and Nansen have listed their reserves as being worth $2.2 billion and $2.5 billion respectively. On-chain data or proof-of-reserves attestations, however, do not provide the public with any way to determine what an exchange’s liabilities are or whether or not the exchange has sufficient assets on hand to cover those liabilities. This is because the public does not have access to these types of data.
The primary KuCoin Updates account spent the better part of the day directing visitors to a blog post regarding the company’s dual investment offering and receiving complaints from users who were unable to withdraw their funds.
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