Binance appears to be suffering from a decline in liquidity. A report from crypto analytics firm Nansen, indicates that Binance had net withdrawals of more than $3.6 billion from Dec. 7 to Dec. 13.
Binance gross outflows have been approximately $8.8 billion, while gross inflows have been around $5.1 billion.
Binance Netflow 7D ($) -3,660,311,347— Nansen (@nansen_ai) December 13, 2022
8,783,380,428 - Outflow
5,123,069,081 - Inflow
Exchange Flows dashboard ⤵️https://t.co/CYrBQLryQ0 pic.twitter.com/vV6vcqoWKK
In addition, while Binance saw more than $2 billion in daily net inflows of Ethereum ERC-20 tokens back in November, that's reversed into outflows of over $1 billion from Dec. 12-13.
According to Nansen technician Andrew Thurman, the drop in liquidity may have been partially caused by large market makers exiting the exchange. Thurman’s research suggested that Wintermute withdrew over $300 million on Dec. 11-12 and Jump Finance redeemed over $30 million in Binance USD (BUSD) from Dec. 12-13.
Binance is the world’s largest cryptocurrency exchange by volume, but it came under pressure on Dec. 12 when a report claimed that the U.S. Department of Justice is considering charging its executives with financial crimes. The Department of Justice has not released an official statement about the matter, but Binance has claimed that the report is “wrong.”
Reuters has it wrong again.— Binance (@binance) December 12, 2022
Now they're attacking our incredible law enforcement team. A team that we're incredibly proud of - they've made crypto more secure for all of us.
Here’s the full statement we sent the reporter and a blog about our remarkable law enforcement team.
In response to the outflows, Binance CEO Changpeng "CZ" Zhao has claimed that the event may be good for the exchange, as it will serve as a “stress test” that will prove Binance is solvent:
We saw some withdrawals today (net $1.14b ish). We have seen this before. Some days we have net withdrawals; some days we have net deposits. Business as usual for us.— CZ Binance (@cz_binance) December 13, 2022
I actually think it is a good idea to “stress test withdrawals” on each CEX on a rotating basis.
Despite this positive attitude, Binance’s own educational resources state that low liquidity can lead to widening bid-ask spreads and greater slippage, both of which can be negative for customers.