- Binance bust will create huge impact on the entire crypto market including bitcoin
- ETHW, USDC, XDC, XCN, CSPR, BSV relatively remain unaffected even after Binance bust.
In the crypto market, a lot can change within a day. In May, the cryptocurrencies TerraUSD (UST) and Terra (LUNA) crashed after Sam Bankman-Fried, founder of the bankrupt cryptocurrency exchange FTX.com, engaged in market manipulation.
There is still no clear cause of TerraUSD and LUNA’s collapse, but Alameda Research is thought to be responsible for a large portion of UST sell orders, which benefited from falling LUNA prices in May.
It’s a scary thought, but what if Binance, one of the most popular cryptocurrency exchanges, were to bust like FTX and Terra? It’s a valid question and many cryptocurrency traders are asking in light of the recent news around these two platforms.
What Happens If Binance Bust ?
The truth is, if Binance were to bust, it would have a huge impact on the entire cryptocurrency market. Every single coin that is traded on Binance would be affected in some way or another. Bitcoin, Etherum, XRP all top100 coins listed at binance might drop and the worst drop might be with Binance native token BNB token price.
For starters, most of the coins that are traded on Binance would be affected by a decrease in liquidity as traders look to move their funds away from the exchange. This could cause some coins to lose value, while others may remain relatively unaffected.
Justin Sun(0x9f84) withdrew 33,911,530 $BUSD and 15,432,715 $USDT from #Binance 9 hours ago.
Then he transferred 33,911,530 $BUSD to Paxos Treasury.
And exchanged 15,432,715 $USDT for 15,435,455 $USDC and transferred to #Circle. pic.twitter.com/SCSPcjYVTC
— Lookonchain (@lookonchain) December 13, 2022
Following up on tweets, Tron CEO Justin Sun is said to have withdrawn $33,911,530 BUSD and later deposited the BUSD to Paxos Treasury. Justin also withdrew 15,432,715 $USDT from Binance 9 hours ago. He went ahead to exchange the 15,432,715 $USDT for 15,435,455 $USDC and transferred it to the circle.
Uncertainity Surrounds Binance
It was reported that Binance native tokens have shown a tremendous fall and reduced to such much as 7.1% on Tuesday (But major market trend was in blue). However, the outflow is said to have been caused by traders as they moved to take custody of their tokens.
The net outflow of digital tokens from Binance was estimated to range from $3.7 billion in the previous week, with an amount of $2 billion within the last 24 hours following firm Nansen’s research data in London.
In terms of one-day efflux, the number was nearly 18 times higher than the next-largest efflux, which was from Bitfinex, the next-largest exchange.
In terms of the uncertainty surrounding Binance, many investors are wondering if their funds would be safe in case of a collapse. If a collapse did occur, it is unclear who would be responsible for the lost funds.
Furthermore, since Binance.com is an unregulated platform and warning given by many global regulators including UK, Singapore, Japan, Malta, Hongkong and more it is difficult to know what user-fund protections are in place to ensure that investors are not left holding the bag in case of catastrophe
Binance has however gone miles on coming up with Proof-of-Reserve in the exchange as a way of verifying the holdings of its customers. However but following the updates from tweets Kraken’s Powell stated that the PoR will be of no use without liabilitie
Powell continues to insist that the Merkle Tree will not be productive without external auditors keeping an eye on it in order to ensure that accounts with negative balances are not included in the exchange.
“The whole point of this is to understand whether an exchange has more crypto in its custody than it owes to clients. Putting a hash on a row ID is worthless without everything else.”
How can Binance Proof-of-Reserve be improved?
I'm sorry but no. This is not PoR. This is either ignorance or intentional misrepresentation.
The merkle tree is just hand wavey bullshit without an auditor to make sure you didn't include accounts with negative balances. The statement of assets is pointless without liabilities. https://t.co/b5KSr2XKLB
— Jesse Powell (@jespow) November 25, 2022
Following more tweets from other crypto investors, Vinny Lingham added that exchanges should also work on making sure that they have their own Proof-of-Liabilities accompanied by their Proof-of-Reserves. Some exchanges may have liabilities that go beyond what they have in deposit, according to him.
Few Altcoins Remain Relatively Unaffected – USDC, XDC, ETHW, CSPR, XCN, BSV.
There are some cryptos with great potential and in the top 100 positions which are not yet listed on Binance. Those cryptos are Chain (XCN), XinFin XDC Network (XDC), USDCoin (USDC), EthereumPoW (ETHW), Casper (CSPR), Bitcoin SV (BSV) where as UNUS SED LEO (LEO), KuCoin Token (KCS) could be added but not included to the list as it’s binance direct competitors tokens. As per coinmarketcap.com (owned by binance only) binance.com listed 384 tokens with 1682 markets.
Coins that may remain relatively unaffected if Binance were to bust are ETHW, XDC, XCN, USDC, CSPR, BSV. Unlike many other coins, they vary between top 100 in CMC but are not listed on Binance and thus traders who own it would not be affected by a potential Binance bust. The sudden withdrawals made by Justin Sun have created a lot of Binance FUD to Binance users.
All in all, if Binance were to bust like FTX and Terra, it would have a significant impact on the entire cryptocurrency market. Many coins would lose value, while others may remain relatively unaffected.
Furthermore, it is advisable to be careful with your investments and keep an eye on developments related to Binance. It would also be wise to diversify your portfolio and invest in cryptos that are not listed on Binance, such as XDC, XCN, CSPR, BSV, USDC and ETHW to minimize the potential losses from a Binance bust other option to keep crypto assets under self custodian wallet and not with exchanges. Always remember “Not your Key not your fund”
Disclaimer: The opinion expressed in this article solely author’s. It does not interpreted as investment advice. Do own research before investing.
Image by Muhammad Salman from Pixabay
