Doubts about the possible stability of Binance have obviously also affected the market price of the BNB cryptocurrency.
In the last seven days, BNB has lost 13%, against the substantial stagnation of BTC and ETH. Until Wednesday, December 14, the BNB Price was also lateralizing like that of the two main cryptocurrencies, but as of Thursday, it has been suffering a bit.
In fact, it went from $275 on Wednesday to $228 on Saturday, accumulating a 17% loss in just three days. However, there was a small bounce yesterday that brought the price back to around $250 or a little lower, thanks to which the weekly loss was reduced to 13%.
It should be noted, though, that among the largest cryptocurrencies by market capitalization, BNB is by far one of the least losings during 2022. Its current price is 64% lower than the all-time highs of last year, while for example, this percentage rises to 75% for BTC and ETH. It is also above its yearly low in mid-June, when it fell as low as $214.
The current difficult stage is a direct consequence of the FTX collapse, although it occurred at two very different moments. The first was right in the middle of November, during the FTX crash when the BNB price fell to $250. The second was last week, due to doubts about the holding of Binance.
Doubts about the Stability of Binance Coin (BNB)
BNB is directly tied to Binance, so any issues with one affect the other as well. Binance’s problems really only concern the fear that it may end up similar to FTX. In fact, in recent days it has suffered strong outflows of funds from its wallets, due to a kind of “run on the bank” by its users, and it has held up very well.
Although there are no concrete and obvious signs of a possible difficulty, fears remain. It all stems from the so-called Proof of Reserve, that is, the evidence provided by Binance and other exchanges, regarding the funds available to support any withdrawal.
After FTX withdrawals were suspended in November due to insufficient funds to pay all withdrawal requests, many users of centralized exchanges began to fear that other exchanges could also be in similar situations.
Exchange of Funds
Funds that customers deposit to a crypto exchange should be able to be withdrawn at any time. This means that, in theory, all exchanges should have a liquid reserve equal to or greater than the value of the funds held in escrow on behalf of their clients.
After the FTX crash, many exchanges were quick to prove that they had enough funds on hand to cover all of their client deposits.
Binance Reserves
Currently, Binance on-chain has funds of around $55 billion. In fact, there is no certainty that these funds are used by the exchange house to solely and exclusively cover customer deposits.
The problem is that last week the company that carried out that audit decided to get out of the crypto sector, and removed from its site all the reports of the audits it had carried out on different crypto companies.
In this context, Binance continued to be insolvent, with no apparent problems, and on-chain reserves were maintained. Before the panic broke out, these reserves stood at more than $62 billion, then since then, they have decreased by $7 billion. All of this suggests that the Binance “run on the bank” stress test can be considered to have been passed with flying colors.
By Audy Castaneda
