In the current state of affairs, the words “trust” and “crypto” barely fit together. The lack of trust in the cryptocurrency industry has been made abundantly evident time and time again. Constant frauds and hacks have plagued the cryptocurrency industry. Powerful individuals have manipulated allegedly democratic systems. Furthermore, the FTX bankruptcy demonstrated that even the most centralized crypto institutions are capable of exploiting their customers. Don’t believe Binance (BNB-USD) at face value when it claims to have made a simple error.
Investors have been struggling with the cryptocurrency industry’s trust issue long before FTX. By way of deflationary tokens and “get rich quick” ventures, this issue existed in 2021. Projects that were simply motivated by excitement and without any real-world applications were able to gain popularity. Investors were taken advantage of by rug pull scams and whale dumps that transformed their apparently foolproof investments into dust as their makers profited from the “hodl“ and “to the moon” feeling that was prevalent at the time.
This problem has been further worsened by the bear market. As the project’s originator left and interfered with democratic government, the Terra (LUNA-USD) implosion was surrounded by controversy. Overleveraged project participants went bankrupt, but not before assuring that customers couldn’t withdraw their own money.
The FTX incident is, of course, the most well-known instance of why crypto investors shouldn’t put their trust in anyone. Even months after the bankruptcy of FTX, the extent of Sam Bankman-Fried’s abuse of client trust is still being revealed. For his acts, the disgraced businessman could receive a 115-year prison term.
Binance claims to have made a sincere error. Investors ought to keep their skepticism.
It is extremely challenging to have a positive connection with cryptocurrency while there is a lack of regulatory clarity. There are obviously plenty of liars and criminals in the area. Even centralized businesses like FTX were defrauding clients and inflating statistics. Because of this, one should be skeptical of the latest Binance news.
For the company’s 94 self-issued cryptos, Binance has been holding client money in the same wallet as collateral. Following the FTX crisis, which involved the company’s mixing of investor deposits and investments by Alameda Research, this mixing of reserves and consumer funds is very alarming news for investors.
Binance self-reported this information because it was learned via a report the business released on Monday. The corporation calls the combination of assets on a single wallet a technological error and acknowledges it. According to a spokesman for Binance, the company is trying to divide the assets.
The comments should not, however, be taken at face value by investors. Crypto firms have repeatedly and willfully worked at the expense of their customers. Although Binance didn’t intentionally mix these funds, it is clear that the company needs to be investigated. Even though Binance did not deliberately combine investor assets and reserves, it is nonetheless alarming to see such a technical failure take place at the biggest cryptocurrency firm. Crypto calls for a fair dose of skepticism.
