According to a Forbes report, the cash outflow from Binance is worse than CEO Changpeng Zhao stated last month. Also, it’s gotten a lot more severe since then. According to the report, the Bitcoin exchange has lost a total of 15% (or $12 billion) of its assets in recent weeks. We have prepared a summary of the Forbes report for our readers.
“Bitcoin exchange is struggling to hold its assets!”
Binance, the world’s largest cryptocurrency exchange, is struggling to hold its assets. As you follow on Kriptokoin.com, investors have been withdrawing their crypto in recent weeks, following the collapse of rival FTX. Also, despite CEO Changpeng Zhao’s assurance that the situation is stabilizing, the exits are accelerating. Customers withdrew a net $360 million on Friday, according to data from crypto data company Defillama.
On December 13, Nansen, a separate crypto data firm, reported that Binance had lost $3 billion in assets the previous week. This represented 4% of the company’s total at the time. A Forbes study has actually revealed that Binance has lost 15% of its holdings since a Twitter post Zhao made the day he downplayed withdrawals from the Nansen report. Still, about a quarter of Binance assets left the exchange in less than two months. Forbes states that it reached out to Binance for comment for this story, but has yet to receive a response.
“The decision not to charge fees for bitcoin trading cost significant revenue loss”
Investors’ lack of confidence is best seen in the performances of Binance Coin (BNB) and Binance USD (BUSD), the exchange’s two eponymous tokens. BNB has lost 29% of its value in the last two months. Also, Forbes estimates that around 29 million tokens remain on Binance, 51% less than what was announced by the exchange on November 10. Meanwhile, the number of BUSD stablecoins in the company has dropped 40%.
There are more subtle ways in which Binance loses trust and influence. Net assets have fallen by 24% since November, while investors of well-known tokens such as MATIC, APE, GALA have reduced their holdings on the exchange by 40-50%. Although it remains the largest cryptocurrency exchange by volume, Binance has been unscathed by nearly a year’s decline in digital assets. According to Nomics, the BNB token is down almost 37% from 12 months ago. Also, the exchange’s decision to stop charging fees for spot Bitcoin trading as the market faltered, according to Forbes estimates, cost it about $3 billion in revenue loss per year.
What’s in your wallet?
This story could also be related to the lack of rules to categorize assets held in crypto wallets. Crypto data firms have yet to agree on what to include in their asset assessments, as evidenced by the broad ($37 billion – $56 billion) estimate of how much Binance could demand as the year begins. Systematically categorizing assets is difficult, especially when there are no standards for what should be included and whether this should be reported clearly from exchange-generated tokens or assets grouped by the blockchains in which they operate.
Below is a breakdown of how these firms measure Binance’s wallet content. We note that the net decline in Binance’s assets includes several sharp increases in two stablecoins, USD Coin (USDC) and Tether (USDT) in recent weeks.
Asset changes elsewhere
It can be argued that most of the asset drops experienced by Binance are similar to the decreases in the stock market. However, data from Defillama shows that only one of the 23 competitors has proof-of-funding information publicly available in the past 30 days. Exchange called MaskEX, which lost more than 15% of the low-profile Binance’s asset percentage.
The situation shows that there are trust issues with Binance. Its position as the largest crypto market increases the likelihood of contagion if these prove to be well-founded. But this isn’t necessarily a doomsday scenario for digital assets. However, the activity could easily shift to other markets around the world.
Investor implications for Binance
As a result, an increasing number of Binance traders are leaving the exchange or sharply reducing their investment rates on the exchange. This sharp decline is occurring at a steady pace without much media attention or market reaction. What makes this story significant is that Binance, by its own inertia, is approaching an abyss where this smooth run in the stock market could intensify.