A protracted decline in the native token of cryptocurrency exchange Binance Holdings Ltd. was stopped, in part due to worries about withdrawals from the biggest digital asset trading platform in the world.
Binance Coin, also known as BNB, has gained about 4% over the last two days, snapping a losing streak that had lasted through Saturday and had been the longest since October. Over the course of Sunday and Monday, Bitcoin and a gauge of the top 100 tokens remained stable.
BNB might be thought of as a gauge of public opinion about Binance. Due to a general lack of faith in cryptocurrencies following the bankruptcy of rival exchange FTX and accusations of fraud against the latter’s founder Sam Bankman-Fried, the platform saw $6 billion in net withdrawals over three days last week.
A spokesperson for Binance declined to comment on changes in the price of BNB while reiterating that the exchange passed a stress test by processing recent withdrawals, which should provide “extraordinary comfort” that funds are secure.
According to Cici Lu, CEO of cryptocurrency consulting firm Venn Link Partners, there was “a lot of FUD about Binance last week.” FUD stands for fear, uncertainty, and doubt. Although the market is in a “shoot first, ask questions later” mode, perhaps the selling is too aggressive right now.
There was a net inflow of 338 Bitcoins to Binance on Sunday as opposed to a record net daily efflux of more than 40,000 on December 13. Compared to a net exit of more than 278,000 tokens last Tuesday, Ether’s net outflows on Sunday decreased to 1,183 tokens.
The accounting firm Mazars Group was hired by Binance and some other digital asset exchanges to work on reports that were intended to demonstrate that the companies have the necessary reserves to handle a spike in withdrawals.
However, Mazars announced last week that it was suspending work for crypto firms due to indications that markets have not been reassured by “proof-of-reserves” reports published thus far. The company was also worried about the intense media scrutiny.
Zhao’s Defense
Binance stated that the business supports greater transparency and is looking for a large accounting firm willing to work on such reports.
Changpeng Zhao, the exchange’s CEO, has been arguing for the exchange’s position. With a link to a post from June stating that Binance was hiring for 2,000 open positions, he tweeted on Sunday that they are still hiring. He had previously stated in a tweet that FUD is temporary.
Sean Farrell, the head of digital asset strategy at Fundstrat Global Advisors LLC, wrote in a note on Friday that it is likely that Binance is solvent and has all of its customers’ assets fully backed.
He added, however, that Binance has “a non-zero chance” of going belly-up “in the instance of a complete bank run.” To quickly reduce any risk of asset loss or seizure, he continued, “one should remove all funds from the exchange.”
BNB was trading in Singapore at around $247 as of 2:10 pm on Monday. Over the last month, when Bitcoin has been stable, the token has lost 9% of its value. In comparison to Bitcoin’s 133% growth over the same period, BNB has increased by more than 1,600%.
