Changpeng Zhao, billionaire and CEO of Binance Holdings Ltd. , during a session at the Web Summit in Lisbon, Portugal, on Wednesday, November 2, 2022.
Zed Jameson | Bloomberg | Getty Images
Binance CEO Changpeng Zhao said that the cryptocurrency exchange has seen only a slight uptick in withdrawals and is operating normally despite the decline in digital asset prices following the FTX crash.
Speaking in an “Ask Me Anything” live session on Twitter on Monday, Zhao said there has been “no news of major withdrawals” from a number of “cold” cryptocurrency wallets the company has released details of in the wake of the FTX bankruptcy.
Zhao said that Binance saw a “slight increase in withdrawals,” but added that this was in line with the usual activity during times of downturn in the cryptocurrency market. “When prices go down, we see withdrawals go up,” Zhao said. “This is very normal.”
After months of stubbornly bouncing around the $20,000 level, volatility returned to bitcoin last week as news of a liquidity crunch in FTX sent the market into turmoil. Bitcoin was trading at $16,600 Monday afternoon in London, barely moving from the previous 24 hours.
“We haven’t seen 80% of our cold wallets withdrawn, or 50% of the funds flowing out of our platform, while that might have happened with some other platforms,” Zhao said. “For us, it’s still business as usual.”
FTX entered bankruptcy on Friday after facing a liquidity crunch as investors fled over concerns about its financial health. Binance originally offered to buy the company but pulled out of the deal after a short period of due diligence.
FTX’s troubles began after a CoinDesk report detailed ties between the exchange and sister company Alameda Research.
A subsequent tweet from Zhao that he would sell Binance’s $580 million stock of the exchange’s native FTT token “due to recent revelations” led to a sell-off in FTT and billions of dollars in withdrawals from FTX.
On Monday, Zhao said he did not intend to cause “turmoil” in the cryptocurrency markets, adding that while some blamed him for “whistleblowing or bubble-making,” he was unaware his tweet would cause such damage.
Speaking of the possibility that more players will experience a crisis after the collapse of FTX, Zhao said, “There will be some cascade effects of infection.” He added that the scale of cryptocurrency failures – and the resulting drop in cryptocurrency prices – will diminish over time.
“In this kind of situation, the first to go down is usually the eldest,” Zhao said. “The cascading effects are getting smaller and smaller.”
The Crypto crisis this year stemmed largely from companies that owed money to others stepping in and tying up their reserves in illiquid tokens.
In May, the $60 billion project Terra saw two of its tokens become worthless after the sustainability of their tech model was called into question. That, in turn, led to a wave of crypto failures, with Celsius, Three Arrows Capital, and Voyager Digital all filing for bankruptcy protection.
“In two years, this will all blow up,” Zhao said, commenting on the FTX crash and ensuing crypto sell-off. People may not even remember this.
Earlier Monday morning, Zhao said that Binance will establish an “industry recovery fund” to help struggling companies and “minimize further negative cascading effects.” Details of the fund are scarce, but the Binance boss said more will be revealed soon.
Binance has its own investment fund that invests in crypto projects, called Binance Labs. So far, Zhao hasn’t heard any “big cries for help” from his portfolio companies which, he said, are “less affected” than other companies in the industry.
Gao’s comments echoed comments from Crypto.com CEO Chris Marsalek earlier on Monday, who said, in response to concerns about an FTX-style liquidity crunch, that his company had a “very strong balance sheet” and had no problem dealing with Leap withdrawals. .
“We as a company never engage in any irresponsible lending practices, nor have we taken any third party risks,” he said.
CNBC reported Sunday that Alameda Research, sister company to FTX, has borrowed billions of client funds from the exchange to ensure it has enough money on hand to process withdrawals.
Bankman-Fried declined to comment on allegations of misappropriation of client funds, but said the latest bankruptcy filing was the result of issues with a leveraged trading position.