The recent collapse of Silvergate Bank initially raised concerns about the stability of stablecoins (which are stablecoins that do not fluctuate in price like normal crypto).
USDC in particular, a stablecoin issued by Circle, was the object of these concerns. And now, when it seems like these concerns were starting to die down, a recent PoR (Proof Of Reserves) audit has shown that Binance, the largest centralized crypto exchange in the world, may have had concerns about the stability of USDC way before and after Silvergate's collapse.
This raises some very important points like how:
On the first day of August, Binance released its Proof Of Reserves report as a way to provide transparency and make its holdings public.
However, something stood out in this report and soon became the topic of hot discussion on Twitter.
As it turns out, something was interesting about Binance's holdings before and after Silvergate's collapse.
BNB started converting its customers' USDC into BUSD, as far back as September 2022.
It is also worth mentioning that Binance, at the time, had a relatively massive USDC reserve.
According to Binance's PoR audit, the exchange's balance in USDC shrunk from more than $3 billion on 1st March, to a (relatively) measly $23.9 million, two months later, on 1st May.
In essence, the key point of the Twitter discussions is the timing of Binance's USDC conversions, and how Silvergate promptly went down shortly after.
Another is how on-chain data indicates that Binance started to convert its USDC holdings into Bitcoin and Ether immediately after the March 12 collapse of Silvergate.
After the collapse of FTX, Proof Of Reserve Audits have gained popularity as a way for crypto exchanges to verify their holdings and show them to the public in the interest of transparency.
After FTX became crippled despite creators' claims that its financial status was well-balanced until its collapse in November 2022, calls for more openness arose in the cryptocurrency sector.
Aleksandar Djakovic, an on-chain expert, mentioned in a tweet, that between March 12 and May 1, BNB purchased about 550,000 ETH and 100,000 BTC.
The transaction is estimated to be worth $3.5 billion and is a very interesting figure because it is almost equal to the exchange's USDC reserves.
In another tweet in the same thread, Djakovic notes that while BNB was internally converting its users' USDC into BUSD, they were also keeping USDC in reserve, leading to their 1st March balance being about $3.5 billion as mentioned earlier.
At the same time, Djakovic noted that the excitement around the BlackRock ETF temporarily halted the fall. Ending the tweet, the analyst went on to say that the upcoming CPI data on Thursday next week can bring the entire market down because of the increase in oil prices.
To answer the million-dollar question, the recent PoR audit shows that the exchange has more than enough reserves to protect its customer funds because the difference between the net balances of the exchange and those of its users is more than 100%.
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