Bernstein Says Crypto Exchange Binance Is Likely To Survive• January 9, 2023 7:52 pm • Comments
Bernstein recently released a new research report which showed that Binance is one of the most stable and liquid exchanges out on the market today.
With the collapse of FTX, it also seems that Binance almost has a monopoly on the crypto exchange business as the exchange’s trading volume makes up a very large percentage of all crypto trading volume.
So far, it has been confirmed that Binance has around more than $55 billion in cold wallet addresses which is very impressive for a single exchange.
Investors had also been worried about storing digital assets on exchanges after the FTX collapse which recently spurred a lot of withdrawals on Binance.
Binance has been able to pass this “withdrawal test” as users were able to withdraw around $6 billion in funds on a single day.
The exchange demonstrated its robustness when about $6 billion of customer funds were withdrawn on Dec. 13, the report said. https://t.co/0QAAEXxiH7 #Bitcoin
— Mik (@Mik96483431) January 3, 2023
“Binance’s undisputed market leadership has not been an accident – it has a long history of doing right by the customer,” the report added, noting that the exchange has made customers whole through hacks and regulatory challenges.
The exchange now accounts for about 75% of the global crypto trading market.
Bernstein says Binance faces two challenges.
First, it has an offshore holding company based out of the Cayman Islands, which means it must take “progressive steps moving towards an on-shore structure,” even at the cost of short-term business.
Second, following the demise of crypto exchange FTX, it is now a “virtual monopoly in global crypto trading.”
While it can’t do much about its monopolistic position, competition may now emerge from decentralized exchanges, as traders could diversify their activities toward self-custody and decentralized trading platforms.
The main thing that is probably holding Binance back is the fact that it is considered an offshore company so the government will likely put strict regulations on it in each nation that it operates in.
The company is reportedly continuing to seek licenses in high value markets like France and Canada in order to continue to grow.
Also, the recent crypto winter has also encouraged a lot of users to store digital assets in cold wallets and has caused a lot of distrust for centralized exchanges.
As a result, there has been a lot of interest now on decentralized exchanges and this could be the new trend that takes off after 2022.
Investors are speculating that DEXs will likely be the new way forward within a decade as the sector continues to mature.
In the last 7 days, the trend of withdrawals from exchanges has continued, especially Coinbase and Binance, with a total net withdrawal of approximately 1.5 billion.
Source: Nansen pic.twitter.com/Z838KXShBy
— Anonymouajsj (@AnonymousElppir) December 27, 2022
Binance shares Bernstein’s notes:
Before the turmoil of 2022, the digital assets market had witnessed two prior crypto winters, and the returns from buying into such periods of market stress have been spectacular, brokerage firm Bernstein said in a research report Monday.
Bernstein notes that despite bitcoin’s (BTC) slump last year, the largest cryptocurrency is up about 60 times from its 2014 low and roughly five times from its 2018 bottom. Ether (ETH) is up 14 times from the 2018 lows, despite a 68% slide last year.
The crypto industry has a strong track record of fighting back from its lows and “taking punches when down,” the report said. Still, some may argue that the macro backdrop is different this time, the report added.
Although the blow on the FTX affair has not yet subsided, a report by Bernstein tends to validate the financial solidity of the Binance exchange which has been able to honor the massive withdrawals of its users. And luckily for the crypto ecosystem. pic.twitter.com/pgriTNJTBQ
— Eskel EHOUN (@ehoun_eskel) January 3, 2023
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