Leaking users? The Binance exchange was siphoned off over the week, with withdrawals exceeding $3.6 billion in total. But Changpeng Zhao (CZ) is reassuring, saying it’s just a “stress test” for the exchange. Should we believe it?
$3.6 billion was withdrawn from Binance during the week
Analyst firm Nansen reported that withdrawals were particularly high on Binance this week. Overall, the platform saw more than $3.6 billion leave its coffers :
Binance Netflow 7D ($) -3,660,311,347
8,783,380,428 – Outflow
5,123,069,081 – Inflow
Exchange Flows dashboard ⤵️https://t.co/CYrBQLryQ0 pic.twitter.com/vV6vcqoWKK
— Nansen 🧭 (@nansen_ai) December 13, 2022
For comparison, Coinbase experienced “only” $574 million in withdrawals over the same period. The difference is of course explained by the difference in size of the two entities, but not only.
Important market makers indeed fled the platform, according to another Nansen analyst:
Some pretty eye-popping outflows across different timescales as Binance FUD ramps up
Jump alone withdrawing over $135 milly on the week, Wintermute pulling nearly $10 milly in the last hour, and net outflows of $300 million in the past day
Track here: https://t.co/aasol67vsX pic.twitter.com/FeN7Myt3CN
—Andrew T (@Blockanalia) December 12, 2022
Wintermute and Jump Finance have indeed contributed to the transit of 300 million dollars during the day of December 12th. There’s a reason for that: Binance did indeed find itself in the spotlight earlier this week, and not in a good way.
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Users are panicking on Binance
Several events have indeed panicked investors. On the one hand, we learned on December 12 that Binance would be targeted by American justice, as part of a money laundering investigation. A Reuters investigation claimed that the platform would have processed more than 10 billion dollars of transactions on behalf of criminal or illegal entities, due to missing control measures.
Binance of course denied the facts, and praised its control team. But that was enough to panic users, who began an exodus of funds. So much so that the platform seemed shaken on December 12: USDC withdrawals were briefly suspended. An event that Changpeng Zhao justified by the closure of banks on weekends, but which has failed to convince particularly wary investors since the fall of FTX.
Changpeng Zhao has spoken out again in recent days, in an attempt to calm concerns. He thus asserted that this represented a “stress test” for the platform, which proves its robustness. As a reminder, Binance has substantial reserves, which it has also replenished since the fall of FTX. CZ also reminded that all Binance funds are counted and listed, and user money is not used:
It costs some network fees to run these “tests”. But keeps the industry healthy.
Exchange business is simple. 👇
— CZ 🔶 Binance (@cz_binance) December 13, 2022
“If an exchange is holding its users’ assets as they are, it’s not tweets that are going to cause problems. It’s simple.»
This obviously wasn’t entirely enough to reassure the community. This is the problem of the hegemony of an entity: if it is threatened, the consequences of a possible fall are particularly strong, and this is felt in the fears of users.
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Source: Binance, press release
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