Binance Collapse FUD Intensifies: How The Crypto Market Will React if Binance Falls

Binance vs the Senators
Binance vs the Senators

Key Insights

  • Binance, the largest centralized crypto trading platform in the world, is facing several challenges, including a lawsuit from the US Securities and Exchange Commission (SEC) and declining trading volume.
  • These challenges have led to some high-profile resignations from Binance, including the CEO of Binance.US, Brian Shroder.
  • Some experts believe that Binance is at risk of collapsing and that such a collapse would have a devastating impact on the crypto market as a whole.
  • Others believe that Binance is a survivor and will be able to weather the current storm.
  • Binance is one of the largest and most popular crypto entities overall, and its collapse would leave a more than $50 billion hole in the market.

The past year has seen its fair share of crypto company collapses, from the billion-dollar holes left behind by the collapse of the Terra Ecosystem in May 2022 — to the millions of traders and investors left devastated by the FTX/Alameda crash in November last year.

Less than eight months later, there is now a great deal of FUD as another crypto behemoth risks collapse.

Over the third and fourth quarters of this year, there have been increasing fears about a possible collapse of Binance, the largest centralized crypto trading platform in the world.

Are these fears grounded in fact? Is Binance really headed for collapse? What are the signs pointing to, or away from the end of Binance?

Let's go over these questions in the rest of this article.

"Sketchy Operations", Declining Metrics And All-Round Binance FUD

According to CoinGecko, Binance offers 362 coins as well as 1336 trading pairs, explaining why so many investors flock to the exchange.

Binance also has an average 24-hour trading volume of $2.5 billion, and a pretty constant exchange reserve of about $58.2 billion, according to DefiLlama.

Binance's exchange reserves
Binance's exchange reserves

According to recent reports, however, after being sued by the US Securities and Exchange Commission on more than a dozen charges relating to misleading investors and operating an "unregistered" and  "illegal" exchange, Binance is now in trouble again.

Last week, The CEO of Binance.US, Brian Shroder, announced his resignation from his post. His exit from the exchange comes after several other prominent executives also resigned from Binance this year.

The reason for Shroder's exit is linked to the ongoing lawsuit between the SEC, the Commodity Futures Trading Commission (CFTC) and Binance, and how Binance.US's user base and trading volume declined from billions of dollars to less than $500 million.

This tweet from Amy Kohls even mentions the declining trading volume on Binance US.

The declining exchange volume over time
The declining exchange volume over time

Kohls went further to say that Binance.US (and therefore Binance's) issues appear to be far from resolved, urging investors and traders to keep a careful eye on the situation for any new developments.

Adam Cochran, founder of CEHV and professor of information science and business analysis took things further, with this tweet.

According to Cochran, the recent mass exodus of executives was caused by Binance.US being "left in the dark" and "gaslit on a lot of the sketchy operations".

Cochran went further to say that the executives who questioned things were promptly sent packing.

This implies that Shroder, Binance.US's CEO may not have resigned, but may have been booted out.

In all, the ongoing lawsuit and the issues Binance.US is currently facing are only matches to the flames of investor fear and doubt about Binance potentially collapsing.

Let's take a look at some popular opinions about the issue.

Blackrock, Fidelity and Valkryie Chose Coinbase – Coincidence?

According to a recent tweet from Miles Bron, the crypto market may experience an "FTX 2.0" crash because of Binance.

Binance may short Bitcoin, causing another crash
Binance may short Bitcoin, causing another crash

Why will this happen?

Apparently, as Binance continues to face challenges and the price of BNB starts to decline, Binance will be forced to liquidate some of its Bitcoin to support the price of Bitcoin.

This is a strategy that works, but only for a short time. In the end, Binance may crash "like FTX", causing another replay of the November 2022 crypto crash.

Buttressing his point, Bron asked, "Is it a coincidence that BlackRock, fidelity, and Valkyrie chose Coinbase over Binance for their $BTC ETFs?"

Keep in mind that according to Binance's most recent (tenth) Proof Of Reserves report, the exchange currently holds around 588,000 Bitcoin, worth about $15.8 billion, according to Bitcoin's current $27,000 average price.

Binance's POR holdings
Binance's POR holdings

The effects of more than $15 billion worth of Bitcoin currently entering the market should Binance start to face problems would be devastating and may take a while to recover from.

The Signs Are There! The Internet Says

Replying to a Binance user who recently faced withdrawal issues on Binance, Adam Cochran mentioned in a series of tweets, that there might be something funny going on at Binance.

 The cracks are starting to show
 The cracks are starting to show

"The cracks are starting to show bit by bit," Cochran says. "It's going to be nasty when the dam breaks".

@lurkaroundfind, another commenter under the original post mentioned that while it may be true that "cracks" are starting to show, Binance has so far survived Luna, FTX and several other regulatory issues. "All CZ has to do is limp along until bitcoin ETF in six months, then high prices will let him unwind"

Is Binance a survivor?
Is Binance a survivor?

However, Cochran replied, saying that he was not convinced that Binance survived any of that. "It maybe just appears to from the outside."

In all, Binance is not only the largest centralized exchange in the world. It is also one of the largest and most popular crypto entities overall.

The crypto exchange going under would be nothing short of devastating for the crypto market as a whole because this would leave more than a 50 billion dollar hole in the market.

The prices of several major cryptocurrencies would crash severely, sending the crypto market in its entirety, up in flames.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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