Ever since the announcement of FTX’s bankruptcy, Binance’s CEO Changpeng Zhao (known as CZ) has remained steadfast about his company’s situation. Binance is the world’s largest cryptocurrency exchange. Some might have expected it to gain ground after the collapse of rival FTX, but in reality, investors have grown wary of crypto as a whole. Thus, there has been a steady outflow of cash from the company, according to an analysis by Forbes. Forbes can conduct this type of analysis because all transactions on the blockchain are public. Therefore, third parties can analyse the data and see whether a CEO’s statements are downplaying or misrepresenting the truth.
You can read more background on FTX here and here, but suffice it to say that a company known for being one of the most steady and reputable entities in the crypto world has been shown to be the centre of widespread fraud. Since the FTX collapse, CZ has been assuring investors that Binance’s financial situation has been stabilising despite the market difficulties. On Friday of last week alone, investors withdrew a net of 360 million USD. Overall, more than 24% of Binance’s assets have left the exchange in less than two months. The lack of faith in Binance can best be seen in the cryptocurrency tokens that bear its name: Binance Coin (BNB) and Binance USD (BUSD). BNB has lost 29% of its value in the past 2 months, while the number of BUSD stablecoins has decreased by 40%.
Excitement led to the cryptocurrency boom. Lack of faith is leading to the current bust. Binance is still the largest cryptocurrency exchange by volume, but its BNB token is down 37% from one year ago. That said, the overall cryptocurrency market has shown an even deeper decline, falling 56% in the last 12 months. The rub is that a growing number of Binance investors – private and institutional – are leaving the exchange or drastically decreasing their assets held there. All of this is happening without too much widespread media attention, and the market itself does not seem to be reacting too much, either. We are witnessing a slow, soft “bank run” on the world’s biggest crypto bank. If this trend continues, expect that murmur to crescendo.