opinion

Crypto SWOT: Customer outflows from Binance's cryptocurrency trading platforms are slowing

Kitco Media
By Frank E Holmes
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Strengths

  • Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Toncoin, rising 31.18%.

  • Binance Holdings' founder "CZ" said outflows from the largest cryptocurrency exchange have stabilized, writes Bloomberg, while warning employees that the industry's recovery from rival FTX's collapse will be bumpy. He'd earlier said Binance saw about $1.14 billion of net withdrawals on Tuesday.

  • Bitcoin spiked to $18,000 for the first time since the exchange FTX slid into a chaotic bankruptcy last month, with the world's largest digital currency also getting a boost from bets on a Federal Reserve downshift. A second month of weaker-than-expected inflation data also boosted crypto, alongside risk assets on the premise that would pave the way for slower Fed hikes, writes Bloomberg.

Weaknesses

  • Of the cryptocurrencies tracked by CoinMarketCap, the worst performer for the week was Neutrino, down 33.29%.

  • Binance Holdings, the dominant cryptocurrency exchange, has been hit by large outflows as traders move to take custody of their tokens amid revelations that rival FTX may have misused customer funds before its November implosion. As reported by Bloomberg, net outflows of digital tokens from Binance amounted to about $3.7 billion in the past week including almost $2 billion in the last 24 hours.

  • Mazars Group, the accounting firm used by crypto giant Binance Holdings and other big players in the industry to vouch for their assets held in reserve, has halted all such work for crypto clients, dealing a blow to an industry seeking to shore up confidence in the wake of FTX's collapse. In an email sent by the French Firm, Mazars said it had suspended work from cryptocurrency firms because of indications that markets haven't been reassured by the "proof-of-reserves" reports it had published so far, writes Bloomberg.

Opportunities

  • Cathie Wood scooped up more shares of Tesla and Coinbase, underscoring her faith in electric vehicles and cryptocurrency as key trends for the future. Ark Investment Management bought nearly 75,000 shares of the EV maker and about 297,000 of the cryptocurrency exchange operator on Wednesday, continuing a dip-buying streak that started in October, writes Bloomberg.

  • Customer outflows from Binance's cryptocurrency trading platforms are slowing, reports Bloomberg, according to blockchain data from two digital-asset analytics firms. The net outflow, the difference between the value of crypto coming into and leaving the exchange, was around $239 million in the past 24 hours, which is down from the daily average of $272 million over the past week.

  • Hong Kong crypto futures ETFs raised over $70 million ahead of their debut. The CSOP Bitcoin Futures ETF has raked in $53.8 million, while the CSOP Ether Futures ETF has collected $19.7 million in initial investments. According to Tim McCourt, an executive at CME group, the listing of the ETFs shows the "increasing client demand for exposure to Bitcoin and Ether," writes CoinTelegraph.  

Threats

  • FTX co-founder Sam Bankman-Fried was accused by U.S. regulators of carrying out a multi-year scheme to defraud investors, reports Bloomberg. The SEC said on Tuesday that Bankman-Fried, who was arrested on Monday in the Bahamas and is facing criminal charges in the U.S., raised more than $1.8 billion from investors. The SEC also said he concealed risk and FTX's relationship with his trading firm Alameda Research and used commingled customer funds.

  • Sam Bankman-Fried's trading house Alameda Research had a secret speed advantage when executing orders on his now-collapsed FTX crypto exchange. Alameda, which also tumbled into bankruptcy last month along with FTX, was able to skirt certain portions of the exchange's trading architecture and sidestep some automated verification process, writes Bloomberg.

  • One of the most closely watched indicators of trader sentiment on Binance's market-leading derivatives exchange suggests that anxiety over additional fallout from this year's crypto market meltdown has grown. The seven-day average of open interest for Bitcoin perpetual futures has dropped 40.3% from the start of November, as of Wednesday. The decline comes as investors pull cryptocurrencies from exchanges such as those run by Binance, writes Bloomberg.
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Frank E Holmes

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., a boutique investment advisory firm based in San Antonio that manages domestic and offshore funds specializing in the natural resources and emerging markets sectors. The company’s no-load mutual funds include the Global Resources Fund (ticker PSPFX), the World Precious Minerals Fund (UNWPX) and the Gold Shares Fund (USERX).

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