Binance Reserves Show Almost Half of Holdings Are Its Own Tokens
Comment of the Day

November 11 2022

Commentary by Eoin Treacy

Binance Reserves Show Almost Half of Holdings Are Its Own Tokens

This article from Bloomberg may be of interest to subscribers. Here is a section:

Binance holds $74.7 billion worth of tokens of which around 40% are in its own stablecoin and native coin, according data shared by Nansen.  

The world’s largest exchange released the information after its co-founder Changpeng Zhao announced earlier this week that Binance would provide proof-of-reserves to be more transparent.

The demise of Sam Bankman-Fried’s, has raised concerns over the opacity of exchange balance sheets and is prompting companies increase disclosures. has also publicly shared its reserves pool on Friday.

Of the $74.6 billion termed as net worth, about $23 billion was in its own stablecoin BUSD and $6.4 billion in its Binance Coin, according to Nansen. 

The exchange has also allocated 10.5% of its holdings in Bitcoin and 9.8% in Ether, Nansen data shows. 

Binance is the first unlisted crypto exchange to come out with the details, since FTX collapsed, the latest in a series of crypto businesses to go bust this year. Crypto exchanges including OKX, KuCoin, Poloniex, Huobi this week vowed to increase transparency and provide greater clarity on their holdings. 

Eoin Treacy's view

The promise of the fintech revolution is decentralized finance. That implies no further need for intermediaries. The ambition is consumers, businesses, creditors, and borrowers will be able to transact with one another over the network at will. That will be facilitated by whatever token is relevant to the network as a medium of exchange.

Tokens are the metering system proposed for this network but their value is irrelevant to the functioning of the projects. Instead ascribing value is necessary to fund the provision of the network by incentivizing participants to sustain it. That’s where the big questions come up. How much incentive is strictly required to sustain the computing power necessary for the network to function?

The issue with crypto exchanges is they are examples of just the kind of centralized finance the decentralized finance sector was created to make obsolete. That’s yet another paradox the mania in crypto assets tends to willfully ignore.

Exchanges thrive because of the desire of traders and investors to hoard tokens, reinvest proceeds in more tokens and trade them. This activity is irrelevant to the long-term promise of the sector and yet occupies the vast majority of its activity.  The fact exchanges blow up with surprising regularity should give pause to any investor. The cross holdings of exchanges where “reserves” are held in exchange-native tokens is akin to a ponzi scheme which is wholly dependent on trading activity to be sustained.
Bitcoin has been subject to extraordinary volatility over the last three sessions but continues to hold the break below $20,000. The underperformance of cryptocurrencies is weighing on the performance of the alternatives sector with some high profile losses experienced by Silicon Valley luminaries.

My view remains the primary tokens are liquidity barometers. They are unlikely to attract significant bullish interest until money supply and liquidity recover.

Coinbase continues to hold the lows near $50 which have offered support since March. If this is a base formation the amplitude is 100% from trough to peak.

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