After the bankruptcy of FTX, the entire cryptocurrencies market threatened to get into trouble. At the beginning of this week, even Binance seemed to be in trouble. Still, it all seems to be not too bad, if we are to believe on-chain analysis company CryptoQuant. Binance would not exhibit the same behavior as FTX.
Antics at Binance?
Binance is the largest crypto exchange in the world in terms of volume, but that does not necessarily mean that everything is going as it should. Earlier this week, it emerged that Binance’s audit for the Proof-of-Reserves it released last month does not provide a clear picture of users’ funds.
In fact, Binance appears to be using some of its clients’ funds to allow other clients to trade with leverage. This means that part of the funds would be constantly unavailable for withdrawals. That has gone well so far, because many customers do not simply withdraw their tokens.
But since Binance has been known to do this, a huge amount of capital has left Binance. In 24 hours, more than $1.6 billion would have been moved to non-Binance wallets.
Binance cannot be compared to FTX
This raises quite a few questions. Competitor FTX has gone under because it also used users’ money for other purposes. CryptoQuant CEO Ki Young Ju writes on Twitter that it all seems to be going well. He doesn’t see any suspicious on-chain practices at the moment.
From Monday to Tuesday, Binance’s BTC reserves are down 8%, but since the troubles at FTX last month, the same wallets have grown 24%. So Binance would not have the extreme outflows we saw with FTX right before this company went bankrupt.
Comparison of stablecoin reserves on Binance and FTX.
The FTX reserve doesn’t look organic with many in/outflows related to non-FTX wallets, and the reserve dropped -93% already, a few days before the bank run.
Disclaimer: I don’t have any relationship with Binance. pic.twitter.com/rf31glimb1
— Ki Young Ju (@ki_young_ju) December 13, 2022
On-chain analyst Nic Carter confirms that the outflows from Binance are not too bad. Bitcoin wallets have now reached the same level as in May this year. In fact, the shrinkage in stablecoins on Binance is barely visible.
this is the ‘bank run’ at Binance you’re all hyperventilating about
(dates @cryptoquant_com @ki_young_ju) pic.twitter.com/hX9yULWeNy
— GPT nic (@nic__carter) December 14, 2022
It should also be said that suspicious situations are not always seen on blockchains. That is why there is also a lot of criticism of the implementation of the Proof-of-Reserves that more and more exchanges are issuing.