Binance Draws FTX Comparisons After Pausing Bitcoin Withdrawals

Following collapse of FTX and other centralized crypto platforms, users have become more skeptical of health of centralized crypto businesses. 

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  •  Binance has had trouble processing withdrawals on the Bitcoin network in the last 24 hours.
  •  These issues have unsurprisingly sparked market concern.
  •  Some users have questioned the health of the crypto exchange.

Following the collapse of FTX and other centralized crypto platforms last year, users have become more skeptical of the health of centralized crypto businesses. 

In the latest instance, the subject of this fear is Binance, generally considered the largest crypto exchange. Binance paused Bitcoin withdrawals twice in less than 12 hours, citing network congestion. 

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Despite Binance’s assurances that it was working to remedy the situation, the halting of withdrawals and data that initially suggested over 127,000 BTC outflows sparked FTX comparisons on Twitter.

“FTX 2.0”

“WhaleWire,” @WhaleWire on Twitter, asserted that users were witnessing a sequel of the FTX collapse. The self-described contrarian investor alleged that customer funds on the crypto exchange were unsafe, though he provided no evidence to support his claim.

"Come back in a few months, and this tweet will have aged like fine wine! It was fun while it lasted," he added.

Several others also expressed the same view. 

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“CelticsForum,” @celticsforum on Twitter, commented, “Sbf volume 2.” 

“Pratoshi,” @pratoshi21, described Binance’s statement as “SBF like,” questioning how Binance planned to “accelerate the confirmation of pending transactions.” 

FTX collapsed in November last year after a run on deposits exposed a significant hole in its balance sheet. Theoretically, this should not have been the case as crypto exchanges are expected to maintain a full reserve of customer deposits at all times, unlike banks. 

In a now-deleted tweet, former FTX Chief Executive Officer Sam “SBF” Bankman-Fried assured users that everything was fine at the exchange, claiming it could cover user withdrawals. However, revelations following FTX’s collapse indicate gross mismanagement of corporate and customer funds.

On the Flipside

  • Unlike FTX, there is no evidence of a significant run on deposits on Binance at the time of writing nor proof of a hole in its balance sheet.
  • The exchange has tipped internal fund rotations for suggested large Bitcoin outflows, sharing DeFiLlama data to back its claims.
  • Bitcoin withdrawals have resumed on the crypto exchange.
  • Binance has weathered significant outflows in the past.

Why You Should Care

Binance controls 62.1% of the market share for centralized crypto exchanges, according to a recent CoinGecko study. Fears over the business’s health could significantly affect the broader market.

To learn more about the recent Bitcoin withdrawal debacle, read this:

Binance’s Double Bitcoin Withdrawal Pause Forces Fee Increase

The U.S. government has high hopes for DLT; find out more:

U.S. Government Bullish on DLT, Reveals Standardization Plans

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.