Binance Holdings Ltd., the dominant cryptocurrency exchange, has been hit by large outflows as traders move to take custody of their tokens amid revelations that rival FTX may have misused customer funds before its November implosion.
Net outflows of digital tokens from Binance amounted to about $3.7 billion in the past week, including almost $2 billion in the last 24 hours, according to data from research firm Nansen as of 9:20 a.m. in London. The one-day number was nearly 18 times higher than the next largest efflux, which was from Bitfinex.
Binance founder Changpeng Zhao has taken to Twitter in past days to express confidence in the firm’s outlook. A spokesperson for Binance didn’t immediately respond to a request for comment on the outflows.
Ignore FUD. Keep building!
—CZ Binance (@cz_binance) December 12, 2022
Exchange outflows are being scrutinized against a backdrop of concern that more dominoes may fall in the crypto sector following the bankruptcy of FTX and the arrest of its founder, Sam Bankman-Fried, on Monday. The fallen mogul’s empire blew up amid allegations that customer funds were mishandled, leaving potentially over a million creditors and eroding trust in the industry.
“The flows are still relatively small considering Binance’s reserves,” said Alex Svanevik, chief executive officer at Nansen, referring to Binance’s recent outflows. “But given everything that’s happened, it’s not surprising many are choosing a cautious approach.”
The U.S. Securities and Exchange Commission on Tuesday said it charged Bankman-Fried with “orchestrating a scheme to defraud equity investors in FTX.”
Jump Trading
The exchange’s native token Binance Coin fell as much as 7.1% on Tuesday and was down 3.3% as of 10:30 a.m. in London. Bitcoin and ether, the two biggest cryptocurrencies, both advanced.
Market maker Jump Trading is among those pulling funds from Binance’s platform, according to Nansen. Jump took out a net $18.4 million in the last 24 hours and $123.4 million in the last seven days on the Ethereum blockchain, the data shows.
While a market maker like Jump routinely moves large sums in and out of exchanges, “it’s unusual to see such steady outflows without any inflows at all,” Svanevik said.
Binance and Zhao have been at pains to counter any attempts to shroud the firm in so-called FUD—crypto parlance for fear, uncertainty and doubt. One part of that is an effort to reassure about its reserves. Binance in a November blog post shared details of digital-asset wallet addresses with tokens worth about $69 billion.
Last week, the exchange released a proof of reserves report. The document, based on a snapshot review by accounting firm Mazars, shows the exchange having sufficient crypto assets to balance its total platform liabilities.
But the report also acknowledges limitations, as it didn’t amount to a true financial statement audit that would have given a clearer picture of Binance’s overall health.