$12 billion vanished from Binance’s assets in less than 60 days

Customers withdrew a net worth of $360 M from Binance. Defillama data shows that this trend is continuing, with investors pulling their money out of the exchange at an alarming rate. If this trend continues, Binance may not be able to hold onto its assets and could face serious financial problems. Binance, the world’s largest cryptocurrency exchange, is struggling to keep its assets. In the wake of the collapse of rival FTX, investors have been withdrawing their crypto in recent weeks, and despite assurances from CEO Changpeng Zhao that the situation had stabilized, outflows are accelerating.
Binance, a separate crypto data firm, broke the news on December 13 that the company had lost $3 B of assets over the previous week. Forbes investigation revealed that Binance had lost 15% of its assets since a Twitter posting by Zhao (widely known as CZ) on the same day as he downplayed the Nansen report withdrawals. Still, nearly a quarter of Binance’s assets left the exchange in less than two months. Binance did not respond to requests for comment from Forbes by publication time.
Investors are not trusting the Binance exchange, as evidenced by the falling prices of BNB and BUSD tokens – BNB has lost nearly 30% of its value in the past two months, and BUSD stable coins have decreased by 40%. This lack of trust is likely because the exchange has not been transparent about the number of BNB and BUSD tokens it has, leaving many of them with less than they thought.
There are several reasons why Binance seems to be losing trust and influence amongst its users. Firstly, the company’s net assets have decreased by 24% since November, while the assets in well-known tokens like Matic, Ape, and Gala have all been reduced by around 40-50%. Additionally, the exchange’s overall trading volume has been decreasing steadily since the beginning of the year.
Although Binance is still the largest cryptocurrency exchange by volume, it has been hurt by the nearly year-long decline in digital assets. This has caused the BNB token to decline by almost 37%, and the exchange’s decision to stop charging fees for spot bitcoin trading as the market faltered cost it about $3 B a year in lost revenue as Forbes estimates.
According to CoinMarketCap, the total value of cryptocurrencies has shown an even greater decline, falling by 56% over the past year to $848.7 B. CZ himself contributed to the collapse of FTX in November when he announced on Twitter that he plans to sell his holdings of FTX tokens to a rival exchange, which were worth about $580 M at the time, citing “recent revelations that have come to light.” He then quickly withdrew the rescue offer, stating “FTX’s issues are beyond our control or ability to help,” implying that an initial review of the company’s books revealed a more serious situation than previously thought.
Crypto Wallets
Cryptocurrencies are still in their early stages, and there are no established rules for categorizing assets held in crypto wallets. This makes it difficult to come up with an accurate estimate of how much, or which, cryptocurrencies are worth. There is also disagreement about what should be included in the assessment, with some firms estimating the value of cryptocurrencies at over $37 B and others believing they are worth only $56 B. Trying to put all of this together is a difficult task. It’s not clear when or if anything will be done to standardize the process. Binance has been losing money on its wallet holdings for a while, but recently there has been a few sharp rises in two stablecoins, USD coin (USDC) and tether (USDT). This suggests that Binance is also using these coins to buy other assets.
BNB
There is controversy about whether Binance’s BNB tokens are real assets that can meet external obligations in times of distress, with some arguing that the token does not have any real value and others saying that the token’s value is difficult to determine. Data firms differ on how much value to attribute to Binance’s BNB holdings. Binance has released a public transparency statement disclosing select information about its holdings in cryptocurrencies. This includes $17 B denominated in BNB, which represented nearly a quarter of its assets at the time.
NB’s price is now $262, which is a third lower than it was on November 4. This is in line with the exchange’s official view on the BNB tokens, which is that they are worth $262 on its balance sheet. However, this is only an estimate, as CMC (the largest crypto website in the world) supplements Binance’s data with that of Nansen and Defillama.
According to CoinMarketCap, Binance’s January 4 BNB figure is equivalent to 57 million BNB tokens, which is 31% of the exchange’s total assets. This figure is higher than any other data firm, which suggests that a large portion of Binance’s wealth comes from IOUs. If the CMC BNB token count is accurate, this means that Binance has a large amount of “crypto pixie dust” in its assets.
In terms of dollar value, Glassnode places Binance’s value at zero, while Nansen and Arkham put it closer to $6 B and Defillama and Messari see it near $10 B. Messari, however, bundles the value of Binance’s holdings on three chains- BNB, ETH, and TRON- which suggests that the almost $10 B in the BNB grouping consists of many other tokens, not just Binance.
Bitcoin
Forbes found large discrepancies in the estimated value of Binance’s bitcoin holdings, ranging from $4.8 billion (CoinMarketCap) to $9.6 B (CER.LIVE). The number of tokens held thus varied sharply from 287,000 BTC to 577,000 BTC. This may be due to faulty queries on the part of some data companies, not searching all Binance wallets. Even so, shrewd observers can well wonder how CER.LIVE has identified $9.6 B of BTC assets in Binance wallets, more than twice the amount shown by Glassnode and CoinMarketCap.
BUSD
Between November 4 and January 4, the quantity of BUSD tokens were decreased by $8,724 (40%). Four data suppliers (Nansen, Glassnode, Defillama, and Arkham) agreed on how much BUSD tokens Binance owned in its wallets as of January 4, around $13,468 M, which is an average of the four data organisations.
CoinMarketCap showed that the value of BUSD on January 4 was $9.58 B, which was lower than the $13.1 B and $13.2 B values that Nansen and Defillama estimated. This means that CoinMarketCap’s estimate of the average value of BUSD isn’t accurate, because if the data from Binance were lower, that would mean that the average value of Bitcoin is lower than what Nansen and Defillama estimated. This is bad news for Binance, because if the average value of BUSD is lower, people might not want to invest in it.
ETHER
According to Forbes, Binance holds 4.49 million Ether (ETH) tokens, worth $5,498 M, based on an average of ETH statistics from the four previously stated data businesses. CoinMarketCap’s significantly lower estimate of $3.3 B, on the other hand, means that Binance only possesses 2.58 million ETH tokens, or 1.91 less tokens than the Forbes average. The Messari ETH estimate (equal to $28.6 B) is out of this world, representing not just the ether owned but also all tokens held at Binance that operate on the Ethereum blockchain. This disparity is substantial. It is one in which CoinMarketCap indicates that Binance has 2.6 million ether tokens, contrasted to 4.48-4.85 million tokens according to all other data sources including Binance itself.
STABLECOINS
The Defillama data shows that BUSD has been dropping steadily over the past few months. On November 25, the day after CZ (the CEO of Binance) tweeted a message of calm, BUSD holdings fell by $1 B. On December 14, the day after CZ’s tweet, BUSD holdings fell by another $3.46 B. This was also the day when Binance saw a simultaneous doubling of USDT and USDC tokens, which together amounted to $6.27 B. A group of large investors swapped BUSD for rival stablecoins USDT and USDC. These changes suggest that someone or something is trying to destabilize the BUSD currency.
The background to the massive dumping of BUSD and pick up in USDC and USDT holdings involves a number of crypto market makers (including Jump Crypto and Wintermute) withdrawing large sums of money from Binance before December 12. After that date, other large players (whales) started to quietly do the same.
Arkham Research saw warning signs when Justin Sun, inventor of Tron and owner of the Huobi exchange, said on Twitter on December 13 that he had deposited $200 M to demonstrate to others that investing in Binance was secure, but did not reveal big withdrawals that followed. In a tweet the next day, Arkham Research concluded: “Over the past 24 hours, this Paxos deposit address has seen $200M BUSD of inflows, all from Binance.” It added “This suggests that this entity is likely moving funds off of Binance, rather than on to Binance.”
Sun Huobi, the CEO of Huobi, reportedly fired 20% of his employees and required the remaining ones to accept payment in USDC and USDT. Arkham Research looked into Sun’s unusual transactions on the ledger and concluded that he may have lost a key banking relationship, making it hard to move large sums or even make payroll to foreign employees. Sun’s stablecoin USDD has been falling this week, but is still trading at 97.6 cents, which admittedly below its dollar peg but still within a level of deviation it has seen multiple times during the past year.
The influx of Sun money raises questions for CZ, who as usual used Twitter to downplay the funds as boosting Tron activity on Binance but later deleted the tweet, presumably because it generated more questions about whether Binance was in need of or had asked money from whale investors.
Sun refuting the theory that he was the owner of Huobi, he revealed in October that he was a member of the advisory committee of the exchange. Huobi said in a Chinese language tweet that only 20% of employees were fired. Sun and Huobi did not respond to requests for comments.
Since June 2021, Binance has been without a chief financial officer, and this has created fear that CZ may be buying and attempting to buy assets with money that no one has certainty is his own. It is also notable that the lack of key financial personnel may have contributed to the abrupt decision by audit firm Mazars to call off on December 19 the proof-of-reserves analysis it had been performing for Binance. Blockchain records viewed by Forbes show that a Binance wallet sent $232 M of BUSD tokens to a Binance U.S. wallet on December 31, sharply boosting available funds at Binance U.S. and conceivably to show unconvinced U.S. regulators that Binance U.S. is able to acquire Voyager assets.
Forbes reached out to Paxos, a company with U.S. banking and New York Department of Finance licenses, regarding BUSD activity, but Paxos declined to comment. Instead, it released a short public statement indicating that it had given a “robust statement about BUSD on December 13” and referring us to its latest report and information on the etherscan website.
Etherscan has identified wallets that it believes are owned by Binance, including “Binance 8” and “Binance: Binance Peg-Tokens.” Binance 8 had $100 M of assets in early 2021 and grew to as much as $15 B in mid-November 2022, but has haemorrhaged BUSD tokens in the past three weeks. The Binance: Binance Peg-Token wallet had $32.4 M of assets in early 2021 and grew to as much as $1.5 B in mid-November 2022, but has bled out almost 9 billion BUSD tokens in the past three weeks.
Asset Changes Elsewhere
It can be argued that the asset decline Binance is experiencing is similar to those at most exchanges, but data from Defillama shows that during the past 30 days there is only one of 23 rivals with proof of funds information publicly available–a low-profile exchange called MaskEX–that lost a greater percentage of assets than Binance’s 15%. This suggests that Binance is experiencing a small decline in assets, relative to the rest of the exchanges, and that it is likely benefiting from the overall market trend. There are some trust issues concerning Binance, which could lead to contagion if they’re proven well-founded. But that’s not necessarily a bad thing for digital assets – in fact, activity could easily shift to other markets around the world.
Investor Takeaways
There has been a steady decline in the number of investors on Binance, with many leaving the exchange or reducing their exposure to it. This decline is happening at a pace without much notice from the media or from the market, and it is likely only a matter of time before this downward spiral intensifies. This is significant because Binance is slowly but surely approaching a point where it could fall into a more serious decline.