The Commodity Futures Trading Commission (CFTC) filing against Binance represents the culmination of increasing regulatory pressure on the crypto industry.
On March 27, the CFTC sued the company, its CEO Changpeng Zhao (CZ), and its compliance leader Samuel Lim for violating US commodity regulations. A daily low of $26,500.
Shortly after application, there was a palpable fear of contagion. The exchange was already on thin ice with regulators as Paxos faced a Wells notice about his BUSD issuance. A shocking report from the FT put further pressure on the exchange, claiming it was lying about its ties to China.
Concerns about a broader market downturn were largely unfounded. Bitcoin broke below $28,000 the day after filing, recouping losses from the previous day and creating solid support.
However, the increasing outflow of funds from Binance worried analysts as it was seen as a sign that the exchange was losing its foothold in the market.
Recent report From Glassnode, we dive deep into netcoin flows through exchanges and discover that Binance saw the largest net outflow of stablecoins in history at the end of March.
This is in line with the overall decline in the USD value of Binance reserves, which has fallen by 45% since the FTX collapse in November 2022.
The report also points to a significant exodus of BUSD from Binance. This is in line with CryptoSlate’s previous analysis, which found that around $14 billion worth of his BUSD has left the exchange since November 2022.
The BUSD outflow caused Bitcoin trading volume on Binance to drop by 13%, reaching its lowest level in over eight months.
Further research by Glassnode found that the decline in stablecoin balances had no impact on Bitcoin. An analysis of BTC coin-denominated balances shows that Binance’s Bitcoin reserves have increased by 67,930 BTC since the beginning of the year. Meanwhile, his ETH reserves on the exchange were largely flat.
“Despite friction between Binance and regulators, the platform appears to be experiencing a major stablecoin shuffle and remains the largest centralized exchange in the market. ‘ concluded the report.
The massive outflow of stablecoins is a direct result of the ongoing banking crisis in the US.The domino effect that began with the collapse of the Silicon Valley Bank has wiped out a significant portion of investor confidence in stablecoins. Earlier in March, nine of the top 10 market cap stablecoins traded below their peg, revealing vulnerabilities in an asset class that has prompted traders to seek stability in Bitcoin.
Despite declining stablecoin balances, Binance remains the largest centralized exchange on the market. The increase in BTC balances on exchanges further confirms this trend, indicating that investors prefer highly liquid markets to deploy their newly acquired BTC.