There has been a lot of fud surrounding Binance lately which got me thinking.
Is Binance going to be the next big centralized exchange that goes bust?
What are the chances that CZ ran the company so poorly that it's on the brink of collapsing? Has he and his army of trading bots mismanaged both company and client funds, to the point that they may go under? Was he caught on the wrong side of the trade with investor funds? Or could it just be a case of regulators tightening their belt around Binance enough to dismantle its userbase, halve its income and put an immense financial burden on its books?
These are all questions Binance users should be asking themselves right now.
Let's look into some of the recent FUD and decide for ourselves is it just unbiased FUD perpetrated to make us sell at a loss before the next leg up, or is it justified cause for significant concern.
In short, after the recent dump that evaporated half of the entire crypto market cap in a matter of days, Binance was forced to implement a liquidation fee for trading on margin and crypto loans. Indicative of substantial pressure building up on their balance sheet, and although they keep flaunting that their Insurance Fund is stronger than ever - can we really trust their numbers?
If their Insurance Fund was intact, and didn't take a considerable blow during the downturn, then there is little reason to implement such vulturous liquidation fees. After all, we're talking about an exchange that has pulled 14 billion dollars in trading volume during the last 24h and it's currently sitting at the numero uno spot across all exchanges based on trading volume. Therefore, we can conclude that if they have to start charging a lot more for the same service, something is off.
The numbers are off, and something is not adding up.
Judging by the exorbitant fee they've imposed for liquidations and crypto loans, they are really short on cash. Seems like they need a lot of money to cover the expenses they've amounted. The exact reason as to why Binance is in the gutter and exactly how many unpaid expenses they have to take care of is unclear.
It could be regulation compliance, predatory expansion to other countries, legal expenses, development, or something else all entirely. We'll probably never find out unless they really go under and have to disclose why.
This came in just two days ago and it's addressed to Binance, coming from Financial Conduct Authority (FCA) — a regulatory body for financial services, firms, and financial markets in the UK. Even though some misinterpreted that it's going to result in a trading ban in the UK, for now, what it boils down to is that UK customers won't be able to deposit to Binance before they get their licenses sorted out.
We've seen similar moves from Ontario (Canada) and Japan, with their regulatory bodies issuing statements and accusations akin to the letter Binance received from UK's FCA.
While Binance's Ontario users were straight-up banned from using the exchange as a result, Japan was a little lighter on the gas pedal, only issuing a warning without a cease and decist order.
Now it seems like we're just waiting for the European Union to pull the trigger.
Observing these regulatory attacks on the biggest crypto exchange in the world is worrisome to say the least, especially when you've got capital on the exchange. But even if you don't hold any crypto on Binance, if it goes under by bankruptcy, hack, or any other way for that matter, spells disaster for the entire crypto sphere.
How bad would it be?
No one can say for sure, but judging by Binance's sheer size and influence on the market, this would be catastrophic. Immediately starting another multi-year bear market kind of catastrophic. Obviously, none of us would like to see something like this play out, and while we can't possibly know if it will happen or not, is it even worth the risk?
I'm in the process of taking most of the funds I hodl on Binance into a cold wallet because the risk is heavily outweighing the benefits. Like most traders recently, I've also lost a big chunk of my portfolio in the dip, and I sure as hell can't afford to lose the rest of it.
Better be safe than sorry guys!
Move your coins of Binance, transfer them to a safer place and take care of your funds because they might vanish overnight as we've seen in way too many cases before.
Stay safe out there fam!