The largest cryptocurrency exchange Binance is the next platform facing intense pressure – or liquidity test – after the Sam Bankman-Fried exchange FTX, which eventually succumbed to a similar heat in November, perhaps amid shady activities.
On Twitter, Binance is currently trending, but mostly from speculations of possible financial strain or liquidity pressure on the exchange. The FUDs (Fear, Uncertainty, and Doubt) have been flying wide, following the recycled report on Monday that the United States authorities are looking to press charges against the exchange and its executives over suspected money laundering violations.
Binance is facing a massive increase in withdrawals
Despite not being a new development, many people seem to have become anxious by the speculations. This is evident as on-chain data shows Binance is currently experiencing an unusual level of outflow. Within the last 24 hours, more than $1.3 billion in crypto assets have been withdrawn from the exchange.
Binance’s CEO also attested to mass outflows on the exchange. On Twitter, Changpeng Zhao (CZ) admitted that the exchange was particularly seeing massive withdrawal requests on USDC. And because USDC deposits are now auto-converted to Binance’s affiliate stablecoin, BUSD, the exchange wants to perform a token swap to reconvert BUSD to USDC in order to fulfill the requests.
However, Zhao said “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.” As a result, USDC withdrawals on Binance are currently paused, until the transactions with the banks are processed.
Irrespective of this, Binance said withdrawals on other assets, including USDT and BUSD, are still working.
Is Binance insolvent?
The largest cryptocurrency is apparently undergoing an intense level of liquidity test, which could possibly become a defining moment for the company if it survives. There can only be speculation on the sheer financial state of Binance; it’s unclear whether the exchange is insolvent or not.
However, there has not been any case of pending or rejected withdrawal requests from the exchange, so far.
Moreso, on-chain analytic platforms show that Binance may have enough liquidity. According to Nansen’s data, Binance currently holds more than $60 billion in crypto assets in several cold wallets. With such reserves, some people debunked the Binance FUD as being baseless.
Binance Futures platform faces downtime
Amidst the Binance FUD arose the downtime of its Futures trading platform, which easily triggered users even more. Most traders tried accessing the platform some hours ago but were greeted with an error message that reads, “data lost due to service malfunction.” In some cases, users’ futures balances were reading zero.
But, rather than responding to the Binance FUDs, Zhao chooses to ignore them. He tweeted that they have “learned the ability to ignore them and keep building,” because Binance has since faced FUDs right from the first day of inception.
“FUD helps us grow, even though they are thoroughly annoying. You can FUD about someone without explicitly mentioning their name, which spreads awareness. It also helps unite their supporters because it forms a common defense alliance,” Zhao added.
