Yesterday it appeared that the ‘Proof-of-Reserves’ that Binance shared may not have been executed correctly. Instead of the evidence instilling consumer confidence, the opposite is now happening. Customers are massively withdrawing their tokens, but unfortunately this is causing some problems.
Huge amount of withdrawals at Binance
CoinDesk writes that a net withdrawal of $ 902 million has been made in the past 24 hours, according to data from blockchain analysis service Nansen. ‘Net outflows’ in jargon refer to the withdrawals without the deposits. The numbers are more extreme than any other exchange in the last 24 hours, and it is nine times more than the next crypto exchange to come. Next up in the list are Bitfinex and Crypto.com. Binance.US is in fourth place.
For Binance itself, it hasn’t been this extreme since November 13. The previous incident was two days after FTX officially filed for bankruptcy. Still, it’s actually not too bad, Arkham analyst Henry Fisher explained in the Telegram chat of the research office. Binance has $64 billion in assets under management.
However, this amount seems to be increasing rapidly. Nansen researcher Sandra Leow writes on Twitter that it is already about $ 1.6 billion on exclusive the Ethereum network (ETH). It is possible that the withdrawals will end soon, but if it becomes more, it could have serious consequences for the crypto exchange.
Over the last 24H, there has been a $1.6b net outflow from Binance (Ethereum only).https://t.co/P62MoKmEnL pic.twitter.com/fCLnOuttnw
— sandra lmeow (@sandraaleow) December 13, 2022
CZ: USDC conversion is causing congestion
Much of the withdrawals appear to be the USDC stablecoin. Binance CEO Changpeng Zhao specifically singled out this token. Binance has stopped supporting this token as a trading pair since September to boost BUSD stablecoin usage. But USDC is an important part of the crypto market. That is why you can still deposit the stablecoin, after which Binance will automatically convert it into BUSD for you.
This turns out to cause some problems. Binance uses a ‘regular’ bank in New York to convert USDC into BUSD and vice versa. Unlike crypto exchanges, they are simply bound by regular working hours. This morning, converting BUSD into USDC was not possible because of this. If all goes well, the option will work again when the bank reopens. You can simply withdraw any other stablecoin without any problems.
On USDC, we have seen an increase in withdrawals. However, the channel to swap from PAX/BUSD to USDC requires going through a bank in NY in USD. The banks are not open for another few hours. We expect the situation will be restored when the banks open. 1/2
— CZ 🔶 Binance (@cz_binance) December 13, 2022