Insolvency Concerns Spell Trouble for Crypto.com's Native Token Cronos (CRO)

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The bears are circling Crypyto.com in a prevalent manner. A simple glance at the seven day price chart for CRO amply shows this 20+% drop in that period:

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As of now, November 14, 2022 at 07:01 ET CRO is priced by CoinMarketCap at $0.07115, down from its from November’s high of around $0.178. Trading volume is up 135.75% over the past 24 hours.

Is this trouble being experienced by Crypto.com merely market fallout from the ongoing FTX and BlockFi debacle? Well, the answer to that is partially, but there is definitely more to the bears visit to Crypto.com beyonf the current FTX mess in the market.

'Lookonchain', an analytics provider, investigated the reserves of Crypto.com, reporting the findings in a Twitter thread posted November 13, 2022. This investigation showed that 40% of Crypto.com's reserves are being held in assets like $SHIB and $CRO, both of which are low liquidity tokens:

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While this discovery by 'Lookonchain' may send shivers down the spines of some traders, with all that is currently going on industry wide it should provide no surprise to the crypto community at large. [See, e.g. Young, M. Crypto.com Cronos (CRO) Price Tanks 28% Following Proof-of-Reserve Concerns. (Accessed November 14, 2022)].

Equally disconcerting, just prior to Crypto.com's release of its reserves status to the public, 'Lookonchain' found it withdrew 210 million USDT from Binance and 50 million USDC from Circle. After providing partial proof of these withdrawals, 'Lookonchain' cautioned the following:

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Binance CEO, Changpeng Zhao ('CZ') confirmed the withdrawal issuing his own comment of caution:

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Adding insult to injury, on October 21, 2022, Crypto.com transferred $400 million of Ethereum to Gate.io allegedly 'by mistake'. Crypto.com maintains these funds were meant to be transferred to cold storage. While the funds have been recovered, many questions have surfaced prompting the following tweet from 'Coffeezilla':

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Given the present tumultuous conditions in the crypto markets, not only does the misdirection of funds merit concern, but the low liquidity assets held in reserve create a major red flag for any firm. At the heart of CRO's worries is the FTX contagion fear of insolvency due to the nature of its reserves, and the fear Crypto.com could collapse in the same manner as FTX. [See, e.g. Gola, Y. Crypto.com’s CRO is in trouble, but a 50% price rebound is in play. (Accessed November 14, 2022)].

Right along with the price decline in CRO, there has been a sharp decline in CRO's perpetual futures funding rates. ["Funding rates are recurring payments made by traders based on the difference between the prices in the futures and the spot market. A positive funding rate means bullish traders (long positions) pay bearish traders (short positions), representing their confidence about a price rally. Conversely, a negative funding rate means short traders pay long traders to keep their positions open" [Gola, supra]. Traders are extremely bearish on CRO as this 'funding rate' fell to -3% on both OKX and Huobi:

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Based on the foregoing, Dylan LeClair, Senior Analyst at UTXO Management, tweeted the following warning:

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Let's face it folks, the present aura surrounding Crypto.com is bleak at best. If you are dealing with it or are thinking about dealing with it, exercise extreme caution. Be careful with your hard earned money out there.

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