Cryptsy is out of order

Tuesday 05 January 2016

The warning signs have been there for months, or longer. What’s going on with this once-thriving altcoin exchange?

One of the largest altcoin exchanges, Cryptsy, is clearly experiencing serious trouble of some sort. Rumours abound about what that might be, but there’s some powerful circumstantial evidence that they are going the way of the Gox. As a disclaimer (we’re not the first to raise this issue but, y’know, legal reasons) it’s worth saying there’s no proof of this - and in fact that’s part of the problem. Cryptsy have not offered proper explanations for what’s going on, and that lack of transparency is always a bad sign.

The exchange has suffered various problems for as long as I’ve known them, which is almost two years. After experiencing delays in withdrawal myself, and hearing about much worse delays from others after that, I stopped using them entirely, as have many others who have seen this kind of thing before. In the last few months, the problems have cranked up a few notches from a status of ‘chronic’ to one of ‘acute’. It’s fair to say we’re probably looking at endgame pretty soon.

What’s going on?

Users have reported persistent issues withdrawing funds from Cryptsy. There are long delays, and support tickets can go unanswered for weeks. Larger bitcoin withdrawals in particular are not being processed, and only a few alts can be withdrawn. Whilst that could be attributed to maintenance issues and poor customer service, this is crypto, and the fact that users have no realistic prospect of regaining funds they have send makes everyone more paranoid. It also means that exchanges have to hold themselves to a higher standard - if they don’t fix a problem quickly or come up with a very convincing explanation, people will naturally draw their own conclusions.

Cryptsy have not provided convincing explanations. They have stuck to a story of a DDoS attack on their site, and hardware migrations to fix the problem. Their updates on Twitter have not been forthcoming, and the last few paint a picture of a disengaged leadership.

Tweets

Amid such a vacuum of information, it’s not surprising that customers are getting angry and asking what’s going on.

The latest - and possibly terminal - warning sign is the prices of some alts on Cryptsy. Several are trading significantly higher than on other exchanges; NXT, Peercoin and Dogecoin, for example, are all trading around 30% higher than on Poloniex. Anyone familiar with the price of bitcoin in the final days of MtGox will wonder if the same effect is at work here: unable to withdraw USD, MtGox’s users instead bought bitcoin and withdrew that, pushing up the price of BTC on the exchange. (Advice on Reddit is that Dogecoin is currently the best way to get money out of Cryptsy.)

Assuming the official party line about DDoS attacks is not the true story - and a glance at Reddit will show few people believe it is - then the question remains of what’s happening at Cryptsy. A few guesses from the web: insolvency, fallout from a Federal investigation into their alleged role in the Paycoin scam, and a good old-fashioned exit scam. It’s also possible they lost money in a hack - most altcoin exchanges have been robbed at one point or another - and have been running a fractional reserve ever since.

Whatever the real story, Cryptsy - unaffectionately dubbed ‘Crapptsy’ and ‘Goxtsy’ by disgruntled customers - seems to be circling the drain. That’s bad news for anyone with funds still stuck there. But, in the Darwinian environment of crypto, a lot of people will say their disappearance is not before time.

 


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