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Crypto Fleeing Binance Finds a Home at Coinbase as U.S. Exchange ‘Wins’ the War

Last Updated November 24, 2023 2:25 PM
Teuta Franjkovic
Last Updated November 24, 2023 2:25 PM

Key Takeaways

  • The impact of the DOJ’s fine on Binance is still uncertain, but the company is experiencing significant outflows.
  • Binance still maintains a substantial asset base of over $58 billion.
  • Coinbase could benefit from Binance’s challenges.

A few days following the U.S. Department of Justice’s (DOJ) declaration of a $4.3 billion fine in a resolution with cryptocurrency exchange Binance, it remains uncertain whether it has significantly impacted the company.

Initially, it appeared that there were no significant outflows, but within a day, the situation underwent a dramatic shift, favoring Coinbase.

$2.2 Billion in Outflows as Investors Weigh Exchange’s Future

Within the initial 12 hours after the announcement, on-chain analytics firm Nansen reported  on X that there was no clear indication of a “mass exodus of funds.”

Nansen’s report  has shown that Binance has previously handled larger volumes of outflow and negative netflow. These events occurred in June 2023 following the SEC’s lawsuit against Binance, in December 2022 amidst rumors of insolvency , and immediately following the collapse of FTX.

However, the situation changed after another 12 hours had passed, considerably. Data indicated  that Binance had experienced $2.2 billion in outflows, suggesting that at least some retail investors were concerned enough to withdraw their coins from the exchange.

BTC from binance to COinbase
Credit: CryptoQuant

Nevertheless, the firm still maintained a substantial asset base of over $58 billion, with stablecoins making up $10 billion of this total.

Moreover, data from CryptoQuant  suggests that some of these funds have been flowing out of Binance and making their way onto rival crypto exchange Coinbase. Analysts  have observed a movement of funds between the two exchanges, with Coinbase’s reserves increasing by around 12,000 BTC over the same period that Binance’s reserves decreased by 5,000 BTC.

Plea Deal as Catalyst for Spot Bitcoin ETF Approval

Matrixport, a crypto services provider, believes  that the acceptance of a plea deal by a former Binance executive could significantly increase the likelihood of a spot Bitcoin ETF being approved by the U.S. Securities and Exchange Commission (SEC).

The firm believes that this outcome would be highly beneficial for the cryptocurrency industry as it would force it to adhere to the same regulatory standards as traditional finance (TradFi) firms.

This, in turn, would make Bitcoin more attractive to institutional investors, who are often hesitant to invest in assets that lack regulatory clarity. Additionally, Matrixport believes that a spot Bitcoin ETF could further solidify Bitcoin’s position as a safe-haven asset in investors’ portfolios.

The recent price volatility triggered by the action against Binance and CZ appears to have resulted in significant losses for leverage traders. Coinglass data  revealed that in the 12 hours following the announcement of the settlement, $110 million in Bitcoin long positions were liquidated, compared to $37.2 million in short positions.

BNB, which doesn’t trade as actively as Bitcoin due to most users staking it, witnessed $3.73 million being liquidated in long positions, compared to $1.61 million in short positions, according to Coinglass . Options volume for BNB has shown a notable increase, surging by 68% to $2.41 million, while options open interest has experienced a 29% surge to reach $3.47 million.

Coinbase Touts Resilience Amidst Binance’s Struggles

That being said, Coinbase seems to remain resilient, boasting a 200% increase in stock value  this year and a market capitalization surpassing $25 billion. Brian Armstrong, the co-founder and CEO, finds satisfaction as two significant competitive threats have faced setbacks.

In a post on the social media platform X, Armstrong acknowledged  the challenges faced by Coinbase in keeping pace with faster-moving competitors, emphasizing the difficulty and cost associated with adopting a compliant approach. The recent developments with Binance, as per Armstrong, validate Coinbase’s commitment to a more rigorous path.

Coinbase has traditionally been regarded as the blue-chip and relatively safe choice for crypto investments. While this approach has resulted in slower growth, the Binance revelations could potentially provide a long-term advantage for Coinbase. The pressure from a larger rival, facing increased scrutiny and regulation, might alleviate concerns and solidify Coinbase’s position in the market.

These developments suggest that some investors are losing confidence in Binance and are choosing to move their funds to Coinbase, which is perceived as a more stable and established platform. It remains to be seen whether this trend will continue, but it is certainly a situation that Binance will need to monitor closely.

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