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

Oct 16, 2020 at 13:04 UTCUpdated Oct 16, 2020 at 13:46 UTC.Bitcoin 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.

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.

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.

"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.

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.

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.