Forbes: $12 billion lost in 60 days, Binance FUD is worse than expected

Original Title: 《Binance Is Bleeding Assets, $12 Billion Gone In Less Than 60 Days》

Original Author: Javier Paz, Forbes

Translation: Mary Liu, BitpushNews

The world's largest cryptocurrency exchange, Binance, is struggling to hold onto its assets. Following the collapse of competitor FTX, investors have been withdrawing their cryptocurrencies in recent weeks. Although CEO Changpeng Zhao has reassured that the situation has stabilized, the outflow of funds from Binance continues to accelerate.

According to data from crypto data company Defillama, net withdrawals by customers reached $360 million in a single day. On December 13, independent crypto data firm Nansen reported that Binance had seen an outflow of $3 billion in assets over the previous week, accounting for 4% of the company's total assets at that time.

A Forbes investigation revealed that, in fact, since the day Zhao downplayed Nansen's withdrawal report on Twitter, Binance has lost 15% of its assets, meaning that nearly a quarter of its crypto assets (approximately $12 billion) have left Binance in less than two months.

The lack of trust among investors is evident in the performance of BNB and BUSD, both of which are named after the exchange. BNB has lost 29% of its value over the past two months, and Forbes estimates that Binance has about 29 million tokens left, a 51% decrease from the amount disclosed on November 10. Meanwhile, the number of BUSD stablecoins held by the company has decreased by 40%.

Binance also seems to be losing trust and influence in more subtle ways. While net assets have declined by 24% since November, investors in well-known tokens like MATIC, APE, and GALA have reduced their assets on the exchange by 40-50%.

Asset Changes ------ Binance (in millions of dollars)

What's in the Wallet?

This story may also be about the lack of a standard practice for classifying the assets held in crypto wallets. Crypto data companies have not reached a consensus on what should be included in their asset assessments, as evidenced by the wide estimates of Binance's reportable assets at the beginning of the year (ranging from $37 billion to $56 billion). Systematically classifying assets is a challenge, especially when there are no standard regulations on what to include and whether to report it (excluding tokens generated from transactions or bundled assets from the blockchains they operate).

Here’s how various data sites quantify the contents of Binance's wallet. We note that in the net reduction of Binance's assets, there has been a sharp increase in two stablecoins—USDC and USDT—in recent weeks.

Binance Crypto Wallet (in millions of dollars)

Binance Crypto Wallet - Token Distribution

BNB

There is considerable debate over whether Binance's BNB (a token whose minting and supply are controlled by trading) represents a true asset that can fulfill external obligations in difficult times. If it can, data companies disagree on how to estimate the value of these assets.

Binance broke its habit of not disclosing sensitive financial information by releasing a transparency statement nearly two months ago that listed some crypto assets. At that time, the company did have $17 billion worth of BNB, accounting for nearly a quarter of its assets.

Fast forward to today, BNB is priced at $262, down a third from November 4. Today, the closest independent observation of the exchange's official view on its balance sheet BNB tokens may come from CoinMarketCap (CMC), the world's largest cryptocurrency website owned by Binance. However, CMC states that it supplements Binance data with information from Nansen and Defillama.

CoinMarketCap's data on January 4 shows that Binance holds 57 million BNB tokens, equivalent to 31% of the exchange's total assets. This percentage of BNB is higher than any other data company and Binance's November statement. However, the reliability of this 57 million BNB is questionable, as it starkly contrasts with the 22 to 40 million BNB identified by three data companies and the 16 million BNB determined by Forbes through publicly available etherscan data. If CMC's BNB token count is accurate, it also means that a significant portion of Binance's wealth comes from its own created platform token.

In dollar terms, Glassnode values BNB at zero, while Nansen and Arkham estimate the amount to be close to $6 billion, and Defillama and Messari estimate it to be close to $10 billion. However, the value calculated by Messari for Binance's holdings comes from three chains: BNB, ETH, and Tron, suggesting that nearly $10 billion in the BNB classification includes many other tokens, not just BNB.

Bitcoin

Forbes also found significant discrepancies in Binance's Bitcoin (BTC) holdings, ranging from $4.8 billion (CoinMarketCap) to $9.6 billion (CER.LIVE), with the number of tokens held fluctuating sharply from 287,000 BTC to 577,000 BTC. This may be due to erroneous queries from some data companies rather than from all Binance wallets. Even so, keen observers are curious about how CER.LIVE identified $9.6 billion in BTC assets in the Binance wallet, which is more than double the amounts shown by Glassnode and CoinMarketCap.

BUSD

From November 4 to January 4, the number of BUSD tokens decreased by $8.724 billion (40%). Four data providers (Nansen, Glassnode, Defillama, and Arkham) reached a consensus on the number of BUSD tokens held by Binance in its wallet. As of January 4, this was approximately $13.468 billion, which is the average of the four data companies.

On January 4, CoinMarketCap reported a BUSD balance of $9.58 billion, which is $3.5 billion lower than the $13.1 billion and $13.2 billion reported by Nansen and Defillama, respectively, both of which contributed to CMC's BUSD statistics. Therefore, this figure is problematic, as to show an average of $9.39 billion, Binance's own data must be tens of billions lower than Nansen and Defillama's estimates. Of course, the lower value of BUSD tokens is bad news for Binance.

COINMARKETCAP Reserves -- Binance

ETH

Using the average values from the aforementioned four data companies for Ethereum (ETH), Forbes estimates that Binance holds 4.49 million ETH tokens, worth approximately $5.498 billion. In contrast, CoinMarketCap's valuation of $3.3 billion is much lower, implying that Binance only has 2.58 million ETH tokens—1.91 million less than Forbes's calculated average. Messari's ETH valuation (equivalent to $28.6 billion) is unique, representing not only the held Ethereum but also all tokens running on the Ethereum chain that Binance holds, which is a significant difference. CoinMarketCap suggests that Binance holds 2.6 million ETH, while all other data sources and Binance estimate it to be 4.48-4.85 million.

Stablecoins

According to Defillama data, BUSD holdings have been steadily declining, with significant drops on November 25 and December 14 (at least $1 billion), the latter being the day after Zhao's reassuring comments on Twitter. During the second major drop of BUSD, the net drop in just one day reached $3.46 billion. On January 4, Binance's USDT and USDC tokens also doubled to $6.27 billion.

BINANCE -- Changes in Partial Stablecoin Holdings (Change since November 12, in millions of dollars)

In summary, these sudden and synchronous changes indicate that one or more large investors have exchanged BUSD for competing stablecoins USDT and USDC.

The massive sell-off of BUSD and the rebound in USDC and USDT holdings occurred against the backdrop of many cryptocurrency market makers, including Jump Crypto and Wintermute, withdrawing large amounts of funds from Binance before December 12. After that day, other whales quietly began to do the same.

On December 13, Tron founder and Huobi exchange "owner" Justin Sun tweeted about how he deposited $200 million to show others that investing in Binance is safe, but did not disclose subsequent large withdrawals, which Arkham Research saw as a warning sign.

In a tweet the next day, Arkham Research concluded: "In the past 24 hours, this Paxos deposit address has seen over $200 million in BUSD inflows, all from Binance." It added: "This suggests that the entity may be moving funds away from Binance rather than transferring to Binance."

On January 6, Coindesk reported that after Justin Sun laid off 20% of his staff and asked the remaining employees to accept payments in USDC and USDT, a "dramatic event" occurred at Sun's Huobi exchange. Arkham Research investigated the unusual transactions on Sun's ledger and concluded that he may have lost an important banking partnership, making it difficult to transfer large sums of money or even pay foreign employees.

Justin Sun's stablecoin USDD has been declining this week, trading at 97.6 cents, which is indeed below the pegged rate to the dollar, but still within the deviation levels seen multiple times over the past year. The influx of Sun's funds raised questions for CZ, who, as usual, downplayed these fund flows on Twitter to promote Tron activity on Binance, but later deleted the tweet, presumably because it raised more questions about whether Binance needed or was asking for funds from whale investors.

Notably, Binance has been operating without a CFO since Wei Zhou's sudden departure in June 2021, raising concerns about whether the funds CZ acquired come from himself or other sources. The auditing firm Mazars abruptly decided to cancel its reserve proof analysis that it had been conducting for Binance on December 19, also due to the lack of key financial personnel. Blockchain records reviewed by Forbes show that on December 31, the Binance wallet sent $232 million in BUSD tokens to the Binance U.S. wallet, significantly increasing the available funds for Binance U.S., and it can be imagined that this indicates U.S. regulators do not believe Binance U.S. can acquire Voyager assets.

Forbes contacted Paxos, a company licensed by U.S. banking and the New York Treasury, to inquire about BUSD activity, but it declined to comment. Instead, it issued a brief public response indicating that it had made a "strong statement regarding BUSD on December 13" and recommended the latest reports and BUSD information on the etherscan website.

Etherscan identified wallet addresses that may belong to Binance, such as "Binance 8" and "Binance: Binance Peg-Tokens," which hold 38.1% and 32.4% of all issued BUSD, respectively. The Binance 8 wallet had $100 million in assets at the beginning of 2021 and grew to as much as $15 billion by mid-November 2022, but has since depleted nearly $9 billion in BUSD tokens over the past three weeks.

Asset Changes of Other Peers

It can be argued that the asset decline Binance is experiencing is similar to that of most exchanges, but data from Defillama shows that among 23 competitors, only one publicly disclosed proof of funds information in the past 30 days—a low-profile exchange called MaskEX—whose loss of assets was higher than Binance's 15%.

This situation indicates that Binance has trust issues, and if these issues are proven to be valid, its position as a leading crypto exchange will increase the spread of FUD, but this does not necessarily mean the end of the world for the crypto industry, as trading activity could easily flow to other global competitors.

Exchange Assets (Asset Units: Millions of Dollars)

Investor Reminder

Most importantly, an increasing number of Binance investors are leaving the exchange or significantly reducing their exposure, and this sharp decline is steadily occurring without much media attention or market reaction. The significance of this article is that if the crypto market continues to retract, Binance FUD is likely to further exacerbate the "soft run" phenomenon in banks.