On-Chain Data Shows Crypto Exchange Binance Does Not Exhibit FTX-Like Behavior

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Binance, the largest crypto exchange by volume traded, is not the next FTX, according to a report by CryptoQuant.

The Seoul-based analytics firm points to on-chain data to back up claims made in a recent audit that Binance is overcollateralized.

At the time the Binances Proof of Reserves report was made, CryptoQuants’ estimate of Binances BTC reserves (liabilities) was 591,939 BTC. This compares to the PoR Balance reports of the Customer Accountability Report of 597,602 BTC. We can see that CryptoQuant’s data covered 99% of Binance’s debt, CryptoQuant wrote, using the ticker symbol for bitcoin. The guarantee is 101% taking into account the assets and debtors of the exchange, he said.

Binance is not seeing the same volume of outflows as FTX in the days leading up to its collapse, CryptoQuant wrote, citing on-chain data. Although withdrawals have increased, they are small compared to the exchanges’ overall reserves. In a tweet, Binance CEO Changpeng “CZ” Zhao said he welcomed the stress test.

Binances’ bitcoin reserves have increased by 4% since the collapse of FTX, CryptoQuant wrote. Ether and stablecoin reserves are down 6% and 15%, respectively.

CryptoQuant points out that Binance differs from FTX-Alameda in the “cleanliness” of the reserves or, to put it another way, in the fact that they are not dependent on the exchanges proprietary token, BNB. A CoinDesk report that showed that FTX’s sister company Alameda Research was materially backed by the exchange’s FTT token sparked a liquidity crunch that ultimately led to its bankruptcy.

(CryptoQuant)

For Binance, CryptoQuant claims that 88.95% of its reserves are clean. This compares to 56% for Huobi, 66.5% for Bitfinex, 81.64% for Kucoin, 97% for Crypto.com and 100% for OKX.

Nansen’s data pegs Binances’ total reserves at $57.4 billion compared to Huobi’s $3.04 billion, Kucoin’s $2.47 billion, Crypto.com’s $3.36 billion, and Crypto.com’s $6.67 billion. billion dollars for OKX. Nansen has no data for Bitfinex.

(Nansen)

CryptoQuant indicates that Binances own reserve level is acceptable.

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Trust the chain

Although there have been some questions about Binance’s financial health, Hochan Chung, Head of Marketing at CryptoQuants, points to the availability of on-chain data to back up all the claims, even if you don’t trust the report published by the trades.

Proof of Reserve provides real-time, transparent and unfabricated data, which is the first time in the history of the financial market. The data is self-verified using blockchain technology, he said in a Telegram message.

What on-chain data cannot explain is corporate control. FTX was known for spending lavishly on employee benefits, such as luxury staff apartments, a generous DoorDash stipend for food delivery, and a charter plane to make Amazon deliveries to the Bahamas from the United States.

“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial reporting as has happened here,” said new FTX CEO John J. Ray. III, who also helped clean up the Enrons mess. in a court document. “From the compromised integrity of systems and faulty regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented. “

Hal Schroeder, a former member of the Financial Accounting Standards Board and a professor at Rutgers University, told the Wall Street Journal that the audit presented by Binance does not comment on the quality of Binances’ internal controls.

In light of what we saw in the Bahamas, I don’t want to conclude that all systems are equally good, he said.

Binance Chief Strategy Officer Patrick Hillmann recently tweeted that business travel at the company is more austere than at FTX.

Binance literally booked me into a Citadines ($83 a night) the last time I visited our Paris office. Sign of a company founded during a bearish cycle. No mansions, but I have a fun job without worrying that the business will be mismanaged, he said.

Binance’s BNB token has fallen almost 3% in the past 24 hours, according to data from CoinDesk, to $265.

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