While these two scenarios are interwoven, this article will identify the events leading to these withdrawals. Furthermore, we shall identify the reasons that necessitated the temporary suspension of stablecoins on the exchange.
Binance cemented its dominance as the foremost crypto exchange after the FTX collapse. Shortly after the collapse, reports showed that the former's Bitcoin holdings exceeded customer deposits on a single day in November 2022.
Glassnode reported that users withdrew BUSD, USDT, and USDC from their wallets, which amounted to $2.159 billion. Similarly, the report shows that the net outflows from the exchange stood at $2 billion since December 12. The entire amount is Ethereum-based token withdrawals.
In the same period, users started pulling out their tokens from the exchange. Similarly, users withdrew the highest number of Bitcoin withdrawals totaling 39,637 BTC, from the exchange in a single day.
Furthermore, Nansen reported that about $1.9 billion of token withdrawals were based on the Ethereum blockchain. Coincidentally, this withdrawal marks the largest daily outflow over 24 hours since June 13. CoinDesk reported that Binance recorded an outflow of about $902 million on Monday.
You would recall that earlier in September, it announced that it would automatically convert USDC to its stablecoin BUSD. This could also be why users withdraw funds from the exchange.
Conclusively, the CEO, Changpeng Zhao, noted the increase in stablecoin withdrawal. He said, "On USDC, we have seen an increase in withdrawals." He said the exchange remains undeterred and is strong to weather the storm. He tweeted that it is all "business as usual."
Experts strongly assert that withdrawals on Binance keep increasing due to the uncertainty about the exchange's reserve. Binance spokesperson has, however, solidified its customers' confidence. The spokesperson said the exchange had " more than enough funds" to meet withdrawal requests.
Furthermore, the spokesperson said that 'customers' assets on the exchange are backed by 1:1, and the capital structure is debt free.'
Another reason that could have necessitated the withdrawal could be the ongoing FUD surrounding Binance. Industry players say the fear, uncertainty, and doubt associated with the crypto winter could have extended to investors. Similarly, the collapse of Three Arrow Capitals and the FTX exchange could cause the FUD.
In another twist, Binance announced the temporary suspension of stablecoin withdrawal. The exchange cited "token swap" as the reason for the suspension. Significantly, a token swap is a situation where crypto token holders exchange their tokens over different blockchains.
The Binance spokesperson said users might have to transfer their funds to online "hot" digital wallets from offline wallets. He said sometimes, these users would have to convert stablecoins from one wallet to another— which might cause delays.
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