Key Takeaways
- Binance is still the world’s biggest crypto exchange despite troubles in the West
- The company’s native token BNB is the standard for its success
- Offloading BNB would signal the company’s demise
The company created by Changpeng Zhao, a Canadian of Chinese heritage, managed to establish its dominance in the crypto market since its founding in 2017.
Binance managed to succeed against the tides created by the collapse of FTX, formerly its biggest competitor in the market until the start of 2023. Ever since Binance has been a household name when it comes to crypto trading.
Although the company is now facing endless scrutiny in the Western market – from lawsuits in the US to a mass exit in Europe – Binance has managed to keep its business afloat with reports showing its ability to cover more than 100% of its customers’ needs.
But, just like other major crypto institutions such as FTX, Celsius, and Terraform Labs, Binance is prone to a downfall one day. If that’s the case, what signs should we look out for?
BNB Is Key
Binance released a proof-of-reserves report, a way to reassure customers that the company has enough in its vaults to cover withdrawals at any point.
The report shows that Binance has an abundance of Bitcoin, Ethereum, XRP, USDC, and of course, its native token, BNB.
What the company doesn’t mention in its PoR is how much of its native coin its founder, management, and staff hold. A report from Fortune claimed that Binance staff holds somewhere between 60 million and 70 million BNB tokens, and Binance did not refute the claim. That’s over 40% of the total 153.86 million BNB coins in circulation.
If we take the claims above as credible information, then we can assume that Binance staff, including its founder CZ, holds more than $14 billion in BNB (the token is priced at ~$240 at the time of publishing). Crunching up the numbers would lead to a logical conclusion that BNB is the key vault for Binance’s capital.
It was even reported that when Silvergate Bank collapsed, causing a serious hit to the US Dollar, Binance offloaded a large sum of USDC – Circle’s stablecoin that pegs its value against the US Dollar – in exchange for BNB.
Bad News For Binance
As we mentioned earlier, Binance is facing serious legal heat in the US. The regulating body for digital assets, the SEC, filed thirteen lawsuits against the exchange, claiming that Binance committed wash trading, commingled customer funds, and evaded US regulators.
As a result, BNB took a serious hit to its price, and the company was forced to halt all US Dollar trades on its platform.
Moreover, Binance is reportedly not doing well in Europe. The exchange has so far been either evicted from or investigated in several European countries, including the UK, Netherlands, Germany, and Cyprus.
But Binance managed to find ways to mitigate the damage done. The exchange managed to trade $90 Billion in crypto in China where it’s illegal to do so.
Binance also entered the Japanese market by taking over an existing exchange, signaling a mass shift to the Eastern market.
How To Know If Binance Is Collapsing
We mentioned earlier how BNB essentially marks the company’s financial well-being. Considering the amount of tokens Binance staff holds, it would be ludicrous to start selling it en mass at any point. Unless there’s a dire need to.
If company executives, including CZ, hold a majority of BNB’s total availability that means they’re betting on its value increasing over time.
Should the company start facing financial troubles, BNB should be the last token to resort to as investors, customers, and other stakeholders would immediately take notice.
If Binance ever offloads significant sums of BNB, the market would immediately react by selling their own tokens due to fears of it crashing.
If that ever happens, it would mean that the exchange is trying to come up with enough liquidity to cover customers’ needs in other tokens, meaning that their vaults are depleting.
