Changpeng Zhao defends Binance amid outflow report
Changpeng Zhao, the CEO of Binance, has found himself in a position of defending his exchange against reports of mass withdrawals, asserting that they present a distorted picture of the situation at hand. As on-chain analytics firms Nansen and DefiLlama disclosed net outflows from Binance following the Securities and Exchange Commission (SEC) lawsuit, investors grew increasingly anxious, leading to a notable 10% drop in the value of Binance’s native BNB token.
Regulatory bodies in multiple jurisdictions have cast a spotlight on Binance, intensifying the pressure on the exchange. Analysts have even gone so far as to predict a decline in Binance’s market share throughout the course of this year. However, Changpeng Zhao argues that the recent reports of outflows fail to accurately represent the true state of affairs. He maintains that some on-chain analytics firms mistakenly classify changes in assets under management (AUM) as outflows, which can include declines resulting from cryptocurrency price fluctuations.
To provide context, Nansen and DefiLlama both reported substantial outflows from Binance subsequent to the SEC lawsuit. DefiLlama disclosed a withdrawal of $3.35 billion from the exchange over the past week, while Glassnode observed a sharp decline of $1 billion, equivalent to roughly 5.7%, in Binance’s balance. Nansen, on the other hand, reported a net outflow of $2.36 billion, with an additional $123.7 million withdrawn from Binance US during the preceding seven days.
Despite these figures, Changpeng Zhao maintains an optimistic outlook regarding the strength of the exchange. He points out that the outflow recorded on June 9, amounting to $392 million, pales in comparison to the staggering $7 billion withdrawn from Binance in the aftermath of the FTX collapse.
Changpeng Zhao goes on to explain that during periods of market volatility, outflows are to be expected, especially given the propensity of arbitrage traders to move significant amounts of funds between exchanges—often far more than what is typically observed on normal trading days.
The impact becomes more severe
The consequences of the SEC lawsuit have had a profound impact on the broader market, erasing gains that had been achieved in previous months. CoinGecko reports that the market capitalization has plummeted by over $80 billion, reflecting a significant 7% decrease. Consequently, Binance’s BNB token has experienced a sharp 10% decline in value, indicative of the gravity of the situation.
Furthermore, the effects of the lawsuit have been keenly felt by centralized exchanges (CEX), which have recorded declining trading volumes. Even prior to the lawsuits, Kaiko reported a 46% decrease in CEX volumes during the month of April. However, these volumes have further diminished since then.
Conversely, decentralized exchanges (DEX) and other decentralized finance (DeFi) products have seen a remarkable surge in trading volumes, skyrocketing by an impressive 444% compared to the previous week. Faced with an SEC that appears predisposed to regulatory actions, investors are increasingly seeking refuge in these alternative platforms, viewing them as a means to safeguard their assets in the face of heightened uncertainty in the centralized exchange landscape.
