HomeTechnologyFear and Doubt Shadow Cryptocurrency Exchanges After FTX Collapse

Fear and Doubt Shadow Cryptocurrency Exchanges After FTX Collapse

the amazing FTX Trading Collapse it has affected the entire cryptocurrency sector, sowing fears that even the world’s largest digital asset exchange is not safe.

Binance clients withdrew nearly $2 billion worth of crypto assets from the exchange in a single day this week, according to to blockchain analytics firm Nansen, noting that users netted $8.7 billion over a seven-day period. The capital outflow forced Binance CEO Changpeng Zhao to respond, and he has tried to assuage concerns that the company is in jeopardy.

In a statement to CBS MoneyWatch, a Binance spokesperson, clients withdrew $1.14 billion from the platform in a 12-hour period, but he said the transactions were “handled with ease.”

in a cheep on Tuesday. Zhao called the recalls “business as usual for us.”

“We’ve seen this before,” said Zhao, who calls herself CZ. “Some days we have net withdrawals; some days we have net deposits.”

But even as Zhao expressed confidence in Binance, he also expects a prolonged downturn in the crypto market. In an email to Binance staff this week, he warned that the next few months will be “bumpy” at the company, CNBC reported. reported.

“General mistrust”

The experts said that for investors, the crypto industry has entered an era of FUD: fear, uncertainty and doubt. Clients who use cryptocurrency exchanges saw what happened at FTX and are now wondering if their assets are safe, they said.

To alleviate client concerns about their financial stability, Binance, Crypto.com, Kraken, and other services have released so-called proof of reserve documents, or PoRs. These are equivalent to a financial snapshot of an exchange, made public to show clients that the company has adequate funds to make a large number of withdrawals at once.

Binance released its PoR last month, and since then there has been a debate among cryptocurrency enthusiasts about how the company made its calculations, Omid Malekan, a cryptocurrency expert and professor of business at Columbia University.

That debate led investors to make large just-in-case withdrawals, experts said.

“There is a general mistrust of [cryptocurrrency] exchanges at the moment,” said crypto risk expert Joshua Peck. “These exchanges are being tested to see if they can support withdrawals.”

stay liquid

Investors have good reason to be concerned. Along with FTX, other cryptocurrency companies filed for bankruptcy this year as the price of digital assets plunged, including BlockFi, Celsius Network and Voyager Digital, and it’s unclear if users of those platforms will ever receive refunds.

However, Malekan said that Binance has become mature enough to weather the storm, noting that the exchange has enough capital on hand to cover client withdrawals if conditions continue to erode. Binance has the equivalent of over $60 billion in reserves, according to Nansen data.

“Binance seems to have its reserves in bitcoin and that’s a pretty liquid asset,” Peck said. “If everyone wanted to get all their bitcoins out at once, on the surface it looks like it’s possible.”

FTX founder Sam Bankman-Fried denied bail after arrest


Malekan also said that Binance appears to have moved away from critical mistakes that doomed FTX, such as allegedly funneling client funds to Alameda Research, the hedge fund formerly operated by FTX founder Sam Bankman-Fried, who is now in a Bahamian jail facing eight charges. of fraud, conspiracy and other financial crimes.

In its statement, Binance confirmed with CBS MoneyWatch that it ensures that client accounts are not used to fund company investments.

“Unlike FTX, Binance does not invest in user funds,” the Binance spokesperson said. “Binance maintains all of its clients’ crypto assets in segregated accounts that are identified separately from any accounts used to hold crypto assets belonging to Binance.”

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