How has Binance FUD Impacted its Exchange Balance?

Exchange balance on Binance dipped 8% in a week, in light of recent Binance FUD (fear, uncertainty and doubt)

Centralized cryptocurrency exchange, Binance has come under fire in recent weeks since December 11, for a few reasons. First, Binance is currently under investigation for potential money laundering and criminal sanctions violations by the Department of Justice of the United States. This is reportedly a part of a wider probe into the crypto industry’s adherence to global anti-money laundering laws.

On-chain transactions have also revealed that a number of crypto firms and users have withdrawn large amounts of cryptocurrencies from the centralized crypto exchange, amounting to a total net outflow of over $3.6 billion. Consequently, this has fuelled the FUD (fear, uncertainty and doubt) surrounding Binance, and in turn, prompted a slew of withdrawals from the world’s leading cryptocurrency exchange.

In the week of December 11 to 18, Binance exchange balances dropped by $9.5 billion from $107.9 billion on December 11 to $98.4 billion on December 18, representing a 8.8% decline.

Binance’s exchange balance dropped at least 2X more during the FTX crash, as compared to during the Binance FUD in December

The $9.5 billion (-8.8%) decline in exchange balance attributed to Binance FUD is relatively small as compared to the decline in exchange balance during the FTX crisis. From November 5 to 13, as FTX was unraveling, Binance’s exchange balance fell by $26.5 billion (-19.5%), from $136.0 billion on November 5 to $109.5 billion on November 13. In other words, $26.5 billion was withdrawn from the exchange during this period.

Comparatively, the decrease in exchange balance during the FTX collapse was 2.3 times more than the decline in exchange balance as of the recent Binance FUD in December 2022.

Methodology

This study examines Bitcoin (BTC), Ether (ETH) and Stablecoins (USDT, BUSD, USDC, PAXOS) balances on centralized cryptocurrency exchange Binance, from November 1 to December 18, 2022, via Glassnode. These cryptocurrencies were selected as it makes up the majority of assets on Binance.

The exchange balances were subsequently converted to its corresponding daily price, in order to obtain values in USD.

Exchange balances account for both deposits and withdrawals, and provide a more accurate overview of Binance’s financial health.

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What is an exchange balance?

A cryptocurrency exchange balance refers to the total amount of cryptocurrencies held by an exchange at a given time, usually in several wallet addresses across both hot and cold wallets. Exchange balances are important and can provide valuable market insights for traders and investors, as they reflect the amount of cryptocurrencies that the exchange has available to trade and the liquidity of the market. A high exchange balance can indicate a healthy, active market, while a low exchange balance may suggest a lack of trading activity and a less liquid market. In the latter scenario, there may be a higher price volatility, increasing the risk for traders to buy and sell cryptocurrencies, given there are fewer buyers to prop up prices or hamper rallies during sudden price or market movements.

Looking for more information on FTX's collapse aftermath? Check out this one we did that examined the amount of cryptocurrency withdrawn after FTX's collapse.