Bitcoin and Altcoin Outflows on Binance, Cause for Concern Among Investors?

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• Nearly a year after FTX’s collapse, Binance is now facing its own challenges. However, unlike FTX, Binance is not experiencing a collapse.
• Binance has witnessed billions in outflows, but this is not particularly concerning as it is in line with Binance’s typical daily outflows.
• Data indicates that on November 9th, Binance experienced a $3.8 billion outflow, resulting in a net outflow of $1.5 billion from the exchange against a $2.3 billion inflow.

Following the legal problems that the Binance exchange has experienced recently, outflows in the exchange have increased: Is this situation worrying?

Is the Increase in Withdrawals from Binance Cause for Concern?

Nearly a year after FTX’s collapse, Binance is now facing its own challenges. However, unlike FTX, Binance is not experiencing a collapse. The exchange has recently strengthened its position in the market by reaching settlements with the DOJ and other regulatory bodies, paying a $4.3 billion fine.

Binance has witnessed billions in outflows, but this is not particularly concerning as it is in line with Binance’s typical daily outflows. Additionally, on-chain data shows a rapid recovery in the asset flow from Binance. According to blockchain analysis company Nansen, over $1 billion has been withdrawn from Binance in recent days, excluding Bitcoin.

This development follows the resignation and guilty plea of founder and CEO Changpeng Zhao on Tuesday, as part of a $4.3 billion deal with the Department of Justice. Additionally, as reported by data provider Kaiko, there was a 25% decrease in liquidity due to market makers reducing their positions. However, since then, Binance’s health has significantly improved, and liquidity has recovered from previous low levels.

Significantly, the billions in outflows from Binance are not a cause for concern, as the data indicates that these figures are consistent with the typical outflow levels of the exchange. Data from Dune Analytics shows that more than $2.4 billion worth of various tokens have been withdrawn from the exchange, but approximately $1.8 billion worth of tokens have also been deposited. However, back then, the situation was concerning as the market showed a downward trend, and holders were withdrawing their assets from Binance. This was an exit caused by FOMO and panic, unlike those who usually deposit assets on exchanges for sale during price declines.

From a general perspective, Binance’s Net Flow was -$600 million on November 21st and -$400 million on November 22nd. These figures represent the amount withdrawn from Binance or the amount leaving the market during the market downturn on those days; which is only about 2-3 times the normal net flow for the exchange. Therefore, the outflows, influenced by FOMO and panic due to the incorrect analysis of the agreement from a bullish perspective, are not a cause for concern.

Even the Net Flow on November 9th Was 2.5 Times Stronger

The amount of cryptocurrency leaving Binance was much higher than this recent decline. Data shows that Binance experienced a $3.8 billion outflow on November 9th, resulting in a net outflow of $1.5 billion from the exchange against a $2.3 billion inflow. This trend was observed due to Bitcoin showing a stable increase from $36K to $38K.

The agreement between Binance and the DOJ, along with other institutions, is a positive development as it brings an end to a long-standing lawsuit and dissipates concerns about “Binance’s money laundering” to “Binance’s failure to maintain AML regulations.” Additionally, after the agreement with the U.S., Binance quickly emphasized that no institution has accused them of “embezzling user funds or market manipulation.” With the conclusion of the case, Binance, under the leadership of the new CEO Richard Teng, can now focus on developing future crypto products.