Bitcoin (BTC) fell below $16,800 as fears about Binance increased in the cryptocurrency market. Despite the positive trend that BTC gained in recent days, the market ended the week with losses. Binance Coin (BNB), the digital asset of the Binance platform, has fallen by 16.5% in the last 7 days and lost 6.5% of its value in the last 24 hours alone.
Bitcoin Falls Below $16,800
Bitcoin has fallen below $17,000 once again as fears about the Binance exchange continue to grow. Binance has been at the centre of attention after the collapse of the FTX cryptocurrency exchange. The focus has been on the proof of reserves and how Binance could prove that they have enough funds to pay every withdrawal and deposit of users.
The CEO of the Binance exchange, Changpeng Zhao, has been working over the last few weeks in order to contain the crypto community that has been requesting more information about what is happening with the exchange.
However, Binance does not have good luck. For example, Binance proof-of-reserves auditor Mazars Group informed us that they are suspending all their work with crypto clients as they refuse to provide auditing for them.
Mazars has just nuked all their crypto clients and are refusing to provide auditing for them.
🚨GET YOUR CASH OFF ALL EXCHANGES ASAP.🚨 https://t.co/FTdDTM08xZ
— Parrot Capital 🦜 (@ParrotCapital) December 16, 2022
Additionally, Changpeng Zhao was on Twitter explaining how the exchange and his team are working in order to protect users’ funds and show that they are solvent.
“Blockchains are public, permanent records. It’s the most auditable ledger,” he wrote on Twitter.
Blockchains are public, permanent records. It's the most auditable ledger.
— CZ 🔶 BNB (@cz_binance) December 16, 2022
It is now time to see what could happen with Binance and other crypto exchanges, which are rushing to show users that they are able to pay back their deposits. Multiple crypto trading platforms have used users’ funds to lend them and get a return on them, similar to what a bank would do with clients’ funds. The main difference with the crypto industry is that exchanges should not be lending the funds, they are supposed to hold users’ digital assets on their behalf.
Lyn Alden, the founder of Lyn Alden Investment Strategy, explained that banks don’t have all the deposits at hand:
“Banks don’t have all the deposits at hand. That’s why they can’t survive bank runs. An exchange supposedly has all the deposits at hand.”
As we can see, she clearly emphasized the word “supposedly,” as this is what crypto exchanges should make sure that they fulfil. Meanwhile, other exchanges are trying to keep users by releasing proof-of-reserves reports and other documents showing that they are able to pay all users’ funds if they withdraw their coins.
Clearly, the cryptocurrency market is facing a crisis that could mark a before and after situation. It is just time to see how the market will stabilize and whether we have reached a bottom or not. Many things should improve, but investors’ money is still in play. Therefore, crypto market participants should make sure that they protect users’ funds at all costs rather than their own interests.
