After the FTX crash, investors are asking serious questions about the long-term future of centralized exchanges. In particular, Binance’s $1.4 billion worth of Bitcoin outflows in just 24 hours has released the FUD.
Central Bitcoin exchanges are on the agenda with FUD news
One of the biggest debates going on in the crypto world right now is centered around Binance. After the collapse of rival FTX, an enormous amount of fear, uncertainty, and suspicion (FUD) is swirling around Binance. The implication here is that Binance is the next domino to drop.
Against this backdrop, Changpeng “CZ” Zhao, founder and CEO of Binance, is publicly taking dramatic steps to address investor concerns. It tries to show that Binance is a reliable business built for the long term. But the questions remain. Could Binance be in danger right now?
Transparency and accountability
The leading exchange has emerged as a champion of transparency and accountability for crypto institutions. Last month, Binance called for more control, more regulation and more protection for individual investors. Binance says the goal should be “stable and clear” regulations for crypto.
Moreover, Bitcoin has shown a remarkable amount of transparency when it comes to its own financial health. Recently, Binance conducted a third-party audit of Bitcoin assets. The results showed that all of the leading exchange’s Bitcoin was over-collateralised. So this clears most concerns about Binance as it does with FTX. Still, there are some concerns about how extensive this oversight is. However, it does show that Binance feels like it has nothing to hide.
Diversified Binance ecosystem
Also, a key point in Binance’s favor is that it has an expanding ecosystem around the world. Most casual investors are unaware that Binance is both an exchange and a Blockchain ecosystem. This is very different from Coinbase, which only exists as a cryptocurrency exchange. So by investing in Binance, you gain access to the full potential of Binance Blockchain.
To give you an idea of how comprehensive this ecosystem is, consider that Binance is at the center of almost every major crypto event in 2022. Binance took the lead as financial institutions looked for ways to help Ukraine in February. When Terra Luna burned down in May, Binance offered to list Terra Luna 2.0 on its exchange. When FTX collapsed, Binance offered to provide the market with the necessary liquidity. As you follow on Kriptokoin.com, Binance even found a way to get involved in Elon Musk’s $44 billion purchase of Twitter. He provided $500 million in financing to one of the richest people in the world.
Too big to make mistakes?
When investors talk about the traditional financial system, they often talk about some institutions being “too big to fail.” The same phenomenon is occurring in the crypto market. The crypto market can handle the collapse of FTX as well as the collapse of a number of high-profile cryptos. But Binance may be too big to fail. If you take down Binance, the entire crypto market could collapse with it. That’s why Fool analysts predict that while this is pure speculation, a mix of regulators, government officials or crypto financial institutions will step in at some point to prevent Binance from completely melting down.
Of course, this does not mean that Binance will not fail. For example, many experts thought Lehman Brothers was “too big to fail” in 2008. But Lehman went bankrupt, causing a major event that triggered the financial crisis. As such, Binance has many paths to failure. First, there is speculation that US officials may be going after Binance for money laundering. There is also speculation that Binance USD, the official stablecoin of the Binance ecosystem, could explode and topple Binance.
A long-term risky bet
At the end of the day, the decision to invest in Binance is indeed a bet on the long-term future of crypto. If you think the industry’s biggest players will survive the crypto winter, Binance is worth a closer look. Binance is currently the giant of the crypto market and also the fifth largest crypto by total market capitalization.
However, it is worth paying attention to some risks before considering Binance as a long-term purchase. Things got a lot darker in the crypto world with the arrest of Sam Bankman-Fried in the Bahamas. Therefore, no one can say with confidence what will happen next.