November has not been a good month for the cryptocurrency world. The collapse of the FTX stock market triggered great fear in the industry and caused investors to flee. The world’s largest cryptocurrency exchange Binance Even he could not escape from all the fear and panic. As a matter of fact, after all the events, the stock market introduced a mechanism called “proof of reserve (PoR)” and invited other companies to take action. The main purpose of this move by Binance was, of course, to regain the trust of customers, but has the exchange managed to reassure them?
The closest competitor of the world’s largest exchange Binance was the bankrupt FTX exchange. The bankruptcy of the stock market, in addition to shaking the confidence of customers, also triggered a volatile movement in the market. In a report by CoinDesk, the claim that FTX embezzled customer funds quickly resonated and helped to reveal the truth.
Although it was discussed at first whether the Binance stock market had a share in this collapse, the dubious statements of FTX and its founder Sam Bankman-Fried helped bring the facts to light. Binance, on the other hand, announced that it would buy the company in order to save FTX while all the allegations were continuing. As a matter of fact, Binance CEO Changpeng Zhao announced that they gave up on this preliminary agreement due to the facts that emerged.
As the movement continued on the FTX front, founding CEO Sam Bankman-Fried fled to the Bahamas. Associated company Alameda ResearchOfficials remained silent. The SBF had partially kept its secrecy until its arrest by Bahamas police on December 13.
Can We Trust Binance Exchange?
Cryptocurrency Leaving aside the summary of developments in the industry, should we really trust the Binance exchange? As a matter of fact, even the collapse of FTX, which was categorized as ’empire’, was not taken into account. However, with the emergence of the facts, the volatility and risk of bankruptcy in the cryptocurrency industry once again came to light.
Looking at the data for October, Binance recorded a trading volume of $390 billion in spot transactions. The closest competitors, FTX, registered $37 billion, while Coinbase registered $47 billion in volume.
Koinfinans.com As we reported, the ‘proof of reserve’ introduced by Binance was announced by many exchanges, especially Coinbase. However, according to some experts, this evidence is not very meaningful. The most meaningful evidence would be more detailed financial data called ‘proof of liability’.
Binance faced billions of dollars of fund outflow in a short time after the financial data it published. During all these shootings, the stock market even temporarily suspended the withdrawals of USDC.
While Changpeng Zhao emphasized that there was no problem with the stock market, he explained that the shootings were stopped for a reason originating from the bank. As a matter of fact, these statements were conveyed ‘oral’ only. That is, the exchange did not provide any concrete details.
As a matter of fact, the leading exchange managed to quickly solve all the problems and proved its confidence by being able to face all the problems experienced in the industry. However, it is also important to consider collapses and bankruptcies as a reality of the industry. Aside from the fact that cryptocurrency exchanges provide convenience, it will be a big question mark to leave the trust completely to them when making important investments.
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Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.