Are users fleeing? The Binance exchange platform has been siphoned off over the week, with withdrawals totalling over $3.6 billion. But Changpeng Zhao (CZ) is reassuring that this is just a “stress test” for the exchange. Should we believe him
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$3.6 billion withdrawn from Binance over the week
Analyst firm Nansen reported that withdrawals were particularly high on Binance this week. In total, 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 – InflowExchange Flows dashboard ⤵️https://t.co/CYrBQLryQ0 pic.twitter.com/vV6vcqoWKK
– Nansen (@nansen_ai) December 13, 2022
By comparison, Coinbase saw “only” $574 million in withdrawals over the same period. The discrepancy is of course explained by the difference in size of the two entities, but not only.
Important market makers have 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 helped move $300 million on December 12. There is a reason for this: Binance did indeed find itself in the spotlight earlier this week, and not in a good way.
Users panic over Binance
Several events have indeed panicked investors. On the one hand, it was learned on 12 December that Binance would be targeted by the American justice system as part of a money laundering investigation. A Reuters investigation claimed that the platform had 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 this was enough to cause users to panic, and the funds began to flow out. So much so that the platform seemed to be shaken on 12 December: withdrawals in USDC were briefly suspended. Changpeng Zhao justified this by saying that the banks were closed at the weekend, but this did not convince investors who have been particularly wary since the fall of FTX.
Changpeng Zhao has spoken out again in recent days in an attempt to allay concerns. He said that this was a “stress test” for the platform, which proves its solidity. As a reminder, Binance has substantial reserves, which it has also replenished since the fall of FTX. CZ also recalled that all Binance funds are counted and listed, and that users’ 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 holds its users’ assets as they are, it’s not tweets that will cause problems. It’s simple. “
Clearly this was not entirely enough to reassure the community. This is the problem with one entity’s hegemony: if it is threatened, the consequences of a possible fall are particularly strong, and this is felt in the fears of users.
