As much as $1 billion has been pulled from Binance over the last 24 hours, data firm Nansen said, after the U.S. Department of Justice reached a historic settlement with the crypto exchange and its founder Changpeng Zhao (aka CZ). Binance will completely exit the U.S. market and pay a $4.3 billion fine for violating money transmission laws and U.S. sanctions, and Zhao was forced to step down.
Binance Net Outflows Cross $1 Billion
Binance, the world’s largest crypto exchange by volume, had a very busy day yesterday. The exchange is paying one of the biggest fines in corporate history to the U.S. DOJ, while its founder and CEO, Zhao, resigned from his position as part of a settlement with multiple federal agencies.
Meanwhile, Binance saw an uptick in withdrawals around the time that CZ pleaded guilty as customers rushed to yank their money out of the exchange.
Data from crypto intelligence firm Nansen indicated that Binance’s 24-hour net outflows topped $1 billion. Nansen further reveals that of Binance’s total outflows, roughly $606 million came from tokens across Ethereum, BNB, Avalanche, Fantom, and Polygon networks.
Exchange net flows can trigger undue panic withdrawals when not handled properly. While exchanges cannot prevent customers from withdrawing their funds, bad PR can aggravate the situation.
However, while the withdrawals at Binance continue, Nansen said in a follow-up tweet that they are not seeing “a mass exodus of funds”, quelling fears of an FTX-style bank run.
The now-bankrupt FTX exchange experienced a somewhat similar withdrawal pattern back in November 2022 when reports emerged that the exchange was insolvent. However, the difference between these two exchanges is the fact that Binance has a much bigger asset reserve than FTX did at the time. While the $1 billion figure is quite substantial, it pales in comparison to Binance’s $65 billion in assets.
Over $1B in value has left Binance since the news of @cz_binance‘s departure. This is a combination of prices dropping and liquidity leaving
However, there remains $65B in Binance’s control at the time of writing. This isn’t the first time Binance has dealt with large outflows pic.twitter.com/2hvoKwGL9y
— Nansen
(@nansen_ai) November 21, 2023
Is Binance Too Big To Go Under?
Besides the criminal settlement with the DOJ yesterday, Binance also has other roadblocks ahead, including a case brought by the U.S. Securities and Exchange Commission (SEC). The company has also been haemorrhaging executives as its legal troubles compound.
Nonetheless, CoinMarketCap data shows Binance is still in the clear lead as the top platform in terms of daily trading volume despite the exchange’s tumultuous day.
Moreover, Binance seems overcollateralized for many of the crypto assets on its books, such as bitcoin (BTC), ether (ETH), and tether (USDT), suggesting the exchange’s net balances surpass what it owes customers. Put, if all Binance users withdrew all the bitcoins they held, the exchange would still have BTC to spare.
Paying the massive restitution and Zhao’s exit is undoubtedly a heavy blow to Binance’s business, but the exchange will continue being in business for the foreseeable future. “Binance will remain a “material entity in non-U.S. markets,” Bernstein said in a Wednesday report.
