The collapse of the cryptocurrency exchange FTX has severely affected the trust investors have in other cryptocurrency exchanges.
The feeling caused a lot of cryptocurrency investors to “opt out” of exchanges, and decide to store their cryptocurrency assets in their own wallets.
Obviously, this has caused a massive outflow of assets from exchange platforms. Even Binance, the world’s largest cryptocurrency exchange, is suffering the effects of public distrust of these types of companies.
On December 15, whale tracker ClankApp reported a massive outflow of crypto from the exchange.
Overall, over $88 million dollars worth of different cryptocurrencies was withdrawn from Binance. The largest single transaction happened around 7 AM (GMT), where a single wallet transferred $25 million worth of Ethereum out of the exchange.
However, these numbers only account for a couple of crypto whales. Binance suffered a hit of over $1 Billion withdrawn from the exchange in a single day.
On top of that, the exchange had to freeze withdrawals of USDT in the platform — it is unknown if the move is a response to the massive outflow that happened this week.
Proof Of Reserves Controversy
Binance has recently faced issues regarding accountability about its reserves, as well as allegations of an impending probe by US authorities, which have alarmed some crypto investors in the aftermath of the fall of now-bankrupt rival FTX.
The presentation of proof of reserves had the intention of raising the company’s transparency, while also “calming down” investors about putting money in the exchange.
However, as it turned out, the proof of reserves initiative turned out to have the opposite effect.
Binance claimed to have more than $60 billion in assets, enough to cover withdrawals. However, the company’s reports do not disclose its liabilities, making determining its financial health difficult.
John Reed Stark, former chief of the SEC’s Office of Internet Enforcement, Binance’s reserves report a “red flag”. The professor claimed in a tweet that the report didn’t address the “effectiveness of internal financial control,”.
When asked about the increase in asset outflow from his exchange, CEO Changpeng Zhao claims not to be worried.
In an interview on Twitter space this week, CZ claimed that the outflow doesn’t worry him and that the exchange has all the assets needed to cover the current withdrawals. “Some days we have net withdrawals; some days we have net deposits,” CZ said on Twitter.