Nearly a year after the collapse of FTX, Binance is now facing its challenges. However, unlike FTX, Binance is not collapsing. The exchange recently settled with the DOJ and other regulators, paying a $4.3 billion fine, a move that further strengthened its position in the market. Although it has witnessed outflows of billions of dollars, this is not particularly concerning as it follows Binance’s typical daily outflows. Additionally, on-chain data indicates a rapid recovery in Binance’s asset flow.
Binance gains its market position
In recent days, as reported by blockchain analytics firm Nansen, more than $1 billion in outflows from Binance, excluding bitcoin, have been recorded. The development follows founder and CEO Changpeng Zhao’s resignation and guilty plea Tuesday as part of a $4.3 billion settlement with the Justice Department.
At the same time, liquidity declined by 25% as market makers reduced their positions, as reported by data provider Kaiko. However, since then, Binance’s health has improved significantly, with liquidity recovering from its previous lows. It is important to note that Binance’s billions of outflows are not alarming, as data indicates that these numbers are consistent with typical outflow levels for the exchange.
Data from a Dune Analytics dashboard reveals that while more than $2.4 billion in various tokens have been withdrawn from the exchange, deposits amounting to approximately $1.8 billion in tokens have also been carried out. However, at that time the situation was worrying as the market was trending downward and holders were withdrawing their assets from Binance. This was the opposite of the usual trend whereby they generally deposit assets on the stock exchange to resell them when prices fall.
From a global perspective, Binance saw a net flow of -$600 million on November 21 and -$400 million on November 22. These numbers represent the actual deficit or amount that left Binance during the market downturn on those days, amounting to just 2-3 times the usual Netflow for the exchange.
Therefore, withdrawals were driven by FOMO and panic, resulting from a lack of proper analysis of the settlement, especially from a bullish angle.
Even the Netflow on November 9 was 2.5 times stronger
On November 9, the volume of cryptocurrencies leaving Binance was significantly higher than its recent setback. Data indicates that Binance experienced an outflow of $3.8 billion versus an inflow of $2.3 billion, resulting in a net outflow of $1.5 billion from the exchange. This trend was observed due to Bitcoin’s steady increase from a low of $36,000 to $38,000.
The settlement between Binance and the DOJ, as well as other agencies, is a positive development, as it brings an end to the protracted case and allays concerns about “Binance money laundering” in relation to “Binance operations who do not comply with AML regulations. Additionally, following the plea agreement with the United States, Binance quickly highlighted that no agency had accused him of “misappropriating user funds or engaging in market manipulation.”
After discovering that the news was bullish, investors pushed the price of Bitcoin towards its 2023 high, with the total market cap reaching $1.45 trillion. With the deal concluded, Binance, under the leadership of its new CEO, Richard Teng, can now focus on developing futuristic crypto products.