If I were a betting man, and I am because I am involved in this crypto-calamity, yes, do expect this cascade to reach them eventually. Putting aside the philosophical questions about contributing to a bank-run, if you have assets on Binance it may behoove to you start withdrawals sooner rather than later.
anyone who claims to know is lying to you. historically speaking, a good heuristic would be: not your keys not your coins, no matter what the exchange is. if you control your own keys then you don't need to wonder about whether binance is solvent or not.
Honestly, I've never really understood crypto so maybe I'm mistaken, however if pretty much all of the major exchanges disappear off the face of the earth, can there be any other outcome than the value of crypto going, as near as makes no difference, to zero? You may still be able to transfer ownership of your coins but for what purpose?
New exchanges will emerge, plus there is Coinbase and Gemini and other regulated ones. You don't need to store your coins on the exchange if you're not selling them. If you want to buy, other people who want to sell will have their coins on the exchange, and after you buy you can withdraw them. I'm not sure why people conflate "liquidity" for trading with people just leaving them there when they're not selling them. Even when people do leave them on the exchange, these coins are not contributing to trading liquidity because they are not up for sale.
The fact that crypto severely and relatively quickly punishes bad custodians who fractionally reserve and trade customer funds is a feature not a bug. And the reason this punishment happens quickly to crush bad actors is the "bank runs" necessary to trigger the event can occur within minutes of rumors or information being revealed to the market, and assets can be withdrawn globally very quickly. No other "banks" or exchanges or brokers are exposed to this much pressure punishing insider schemes like this.
Even the gold and silver markets have a lot of people claiming there is paper leverage way in excess of physical supply, and that large geopolitical interests suppress the price of gold so as to defend against it taking value from sovereign debt and currencies. I think there is some truth to this, but the reason it is allowed to persist and that there may not be true "price discovery" in gold and other commodity markets is that no one takes delivery, and so many simply leave their physical asset on custodian banks. Who knows what they are doing with this, or if their asset is truly allocated. It would require a crypto style "bank run" to punish these potential bad actors. Only crypto has this over and over again at scale.
> if pretty much all of the major exchanges disappear off the face of the earth, can there be any other outcome than the value of crypto going, as near as makes no difference, to zero?
Presumably someone will make a new one; it seems unlikely to me that all crypto will go to zero in the near to mid future, even assuming what you say.
If Binance was to topple, the price of coins would drop. Most people using crypto exchanges don't care about holding keys, they only care about making a profit in a fiat currency.
> if you control your own keys then you don't need to wonder about whether binance is solvent or not.
That's not really true though, is it? The value of those coins is directly tied to the existence and function of (enough) exchanges to facilitate their use. Enough exchanges fold, and your coins won't be worth the bits they're taking up.
How much of Binance's $500-million worth of FTT did they manage to salvage before FTT / FTX went bankrupt? We already know that Binance had at least one giant pile of FTT, as they tweeted about this before FTX / FTT troubles started to go down.
In some sense, it has already reached Binance. The real question is whether or not Binance has enough funds to weather that kind of storm.
The FTT is one thing. Another question is whether Binance is levered in a way that can cause insolvency when the value of its assets drops (many cryptos have been dropping in value). CZ says no, but SBF said the same.
Depends on the cost basis. When FTT was created Binance could have received 500MM worth of tokens for providing say 10MM of UST. Such is common for early token sales to gain support of large players to convince commoners to pump the token.
I doubt anyone at Binance would lose any sleep over a 500 million hole in their balance sheet. (Because I believe that Tether is, was, and will be significantly undercapitalized.)
The only thing that can unravel Binance and Tether is a big enough bank run.
Small sample set, but I recently saw a poll on a DeFi fb group that I'm in and the question was: "where are you moving your crypto during this sh*t show?"
If/when this cascades to Binance we can it will be a big big setback for crypto and probably slows down adoption of decentralised currencies by decades.
