Binance & FTX – Will one meet the other’s fate?
Experts disagreed with concerns about Binance's insolvency risks as data from the exchange's reserves narrated a different story.
- Binance’s Bitcoin reserves increased by 14% since the FTX collapse.
- Binance’s clean reserve ratio was over 94% at the time of publication.
The world’s largest crypto exchange Binance [BNB] has been on the receiving end of unrelenting regulatory pushbacks in 2023. The latest revelation that the U.S. Department of Justice (DoJ) was contemplating filing fraud charges against the crypto behemoth added further anxiety among market participants.
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Fears of an FTX-style bank run in November 2022 was the factor cited by law enforcement bodies as preventing them from proceeding in the matter. But is Binance’s balance sheet as shaky as the now collapsed FTX?
Analyzing Binance’s exchange reserves
Ki Young Ju, CEO of on-chain analytics firm CryptoQuant, appeared to disagree with concerns of Binance’s insolvency risks. He cited its exchange reserves data to back up his claim.
I've heard about the 'bank run/insolvency risk on Binance' a hundred times for years, but their user balances always tell a different story.https://t.co/66yVQGjTBM https://t.co/YgxZcQPTUt pic.twitter.com/DgR4JqiKYP
— Ki Young Ju (@ki_young_ju) August 2, 2023
Evidently, Binance’s Bitcoin [BTC] reserves, or put differently the exchange’s BTC liabilities, revealed a steady growth, sans any inorganic spikes or drops. Infact, the reserves increased by 14% since the FTX collapse. At the time of writing, the deposits were nearly 563,966.
In contrast, FTX witnessed inorganic movement of assets in and out of the exchange wallets leading to the collapse, indicative of serious liquidity concerns.
A similar contrasting picture came to light when the deposits of the second-largest crypto asset, Ethereum [ETH], were analyzed. At the time of writing, roughly 4.07 million ETH were held on Binance. While down 17% since the FTX collapse, the dip was more due to investors’ HODLing tendencies rather than evidence of misappropriation.
When compared with FTX’s trajectory, there were dramatic ups and downs in ETH’s deposits on the exchange, with a massive 77% decline in a span of five days before the bankruptcy.
Binance appeared ‘clean’
Another important indicator frequently used to assess the financial health of crypto exchanges is the “Clean Reserve” metric. This metric represents the % of the total reserves that are not represented by the exchange’s own token. The closer to 100%, the better.
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Binance’s clean reserve ratio was over 94% at the time of publication, as per CryptoQuant, with BNB accounting for the rest. This served as further evidence to prove that Binance’s current situation didn’t warrant panicking.
