Binance Coin, one of the largest digital currencies in the market, and the virtual currency of the Binance exchange dropped fast today as fears spread about Binance’s insolvency. According to data shared by CoinGecko, Binance Coin lost more than 5% of its value in the last 24%, only Dogecoin (DOGE) registered larger losses among the top 35 largest virtual currencies.
Despite that, Changpeng Zhao, the CEO of Binance, wrote that users should ignore FUD and keep on building.
Binance Coin Falls as Fears Around Binance Grow
Binance’s proof of reserves raises red flags according to a recent report released by Cointelegraph. Among the most concerning issues, they found corporate structure, Bitcoin liabilities and internal control quality. This is according to multiple financial specialists that have been consulted by The Wall Street Journal in a recently released report.
Multiple things could affect Binance’s ability to remain sustainable in a volatile market such as the current one. One of the red flags that have been found about Binance is related to the lack of information available about the way in which the corporate structure has been structured in this crypto exchange.
At the same time, there were some findings linked to the total Bitcoin liabilities reported. A few weeks ago, Binance released proof of its reserves in order to bring clarity to the crypto market and make sure that users trust the exchange that they are using. This shows that Binance is collateralized at a rate of 97%. Therefore, there is a large possibility that Binance would not be able to achieve the 1:1 ratio that exchanges should have.
The report reads as follows:
“We found that Binance was 97% collateralized without taking into account the Out-Of-Scope Assets pledged by customers as collateral for the In-Scope-Assets lent through the margin and loans service offering resulting in negative balances on the Customer Liability Report.”
BINANCE'S PROOF OF RESERVES RAISES RED FLAGS, ACCORDING TO A REPORT – COINTELEGRAPH.
— Breaking Market News ⚡️ (@financialjuice) December 12, 2022
This comes at a moment in which, the crypto market is worried about what could happen with digital currencies. Let’s not forget that a few weeks ago, FTX, one of the largest and most liquid virtual currency exchanges in the world after Binance, imploded. The implosion of FTX has also created other issues, including the destruction of the FTT virtual currency and users’ savings on the platform.
After this situation the market tanked. Bitcoin fell below $16,000 for a short period of time, and it is now struggling to remain above $17,000, an important psychological level for the virtual currency. Nevertheless, users show that they are not so confident about Binance, as many of them are selling BNB when the market is not bearish.
At the time of writing this article, Binance is being traded for $275 per coin, a 5.2% decrease compared to 24 hours ago. Additionally, the virtual currency started the year above $475, which shows the weakness of the whole crypto market in recent months.
Meanwhile, Changpeng Zhao, the CEO of Binance wrote that users should ignore FUD and keep building new and better solutions for the crypto community.