Billions of dollars are gone… the big shakeup in the digital currency market and tips for investors
After the shock caused by the bankruptcy of the cryptocurrency platform FTX, new concerns have descended on cryptocurrency investors following the massive withdrawal of funds from the largest cryptocurrency platform (Binance).
Investors pulled as much as $3 billion from Binance on Tuesday, according to blockchain analyst Nansen.
Why such a big draw?
The report of “CNN Business” attributes this to the negative atmosphere that reigns in the market of digital currencies, which scared the users of the largest exchange of these currencies in the world.
Nansen’s content manager, Andrew Thurman, told CNN that Binance noticed “this spike in withdrawals following the release of the US Department of Justice’s investigation into the exchange, which made investors nervous.”
Another factor that destabilized the situation was the revelation that “a major market shareholder has withdrawn large amounts of money from Binance without payment over the past weeks.”
These factors created panic in the markets.
Is Binance Like FTX?
Nansen CEO Alex Svanevik confirmed to CNBC that “the situation for Binance is completely different from what happened with FTX.”
He explained that “Binance has $60 billion in assets, and withdrawals are a small percentage of that.”
Inside the box, Binance CEO Changpeng Zhao stated that the exchange witnessed a withdrawal of about $1.1 billion, according to CNN.
“Funds are returning to the platform,” Zhao assured during an interview on Twitter, describing the withdrawals that occurred as “very normal market behavior.”
Zhao said some investors had pulled out of the cryptocurrency sector after the collapse of FTX in November.
Commenting on the withdrawal, Zhao believes that the damage done to some investors by FTX has led some to believe that all other digital currency platforms are bad, but he clarified that “if one bank is bad, it does not mean that all other banks are like that. “
Concerns about the sector have pushed cryptocurrency prices lower. Bitcoin has dipped below $18,000, down more than 60 percent since the start of the year.
Binance’s operations are also under scrutiny following the FTX bankruptcy, according to a CNN Business report.
Zhao said on Wednesday that the situation on Binance Currency Exchange had “stabilized”, in an attempt to calm investor concerns after the company was forced to halt withdrawals.
Should investors withdraw their funds from cryptocurrency exchanges?
Digital currency consultant Nader Al-Dirani advises investors in this area, saying that “you should use the Binance platform for trading and use an independent “Software Wallet” such as “TrustWallet” or “Hardware Wallet” such as “Ledger” for keeping currency owned by an individual.
It explains that the platforms are for trading purposes only and are not a suitable place to hold one’s digital currency holdings.
Al-Dirani says that according to the trading platform’s statistics and data analysis, the stock of the Binance platform portfolio fell by 8 percent of bitcoins, and during November the stock recovered and rose by 24 percent while the FTX platform collapsed.
He said that according to Zhao’s statement on Wednesday, total user withdrawals from the Binance platform were around $6 billion, while deposits exceeded $6.5 billion.
Al-Dirani pointed out that Binance is the first in the world, with a big difference from the competitor in the next rank, and is leading the digital currency market, especially in terms of obtaining licenses from many countries, such as France, Spain, UAE and others.
Is the cryptocurrency bubble bursting?
In a previous interview with Al-Hurra, financial markets expert Nadim El-Saba believed that FTX is not the first platform to go bankrupt, and it won’t be the last either. Other digital currency trading platforms will fall successively like “dominoes”.
However, he noted, “It cannot be said that the era of cryptography is over because the market is more than just a trading platform. The idea of blockchain is broader than just a digital currency that trades and falls.”
He added that what is happening is the washing of the market to clean it of all platforms that used people’s money for dubious investments. This is now leading to many losses.
The era of encryption is passing through a sensitive phase, but it will not end, but will continue in a dysfunctional way, according to Al-Sabaa.
He emphasized that “in the digital currency market, it is normal for people to lose their money, especially since they invest in assets with a high degree of risk.
For his part, financial expert Dan Azzi, who identifies himself as an opponent of digital currencies, explained earlier in an interview with Al-Hurra that “these currencies are nothing but a scam that misleads people, and their end is total collapse,” adding that ” this collapse will not happen now.” “.
For Azzi, two things need to happen for cryptocurrencies to crash completely:
To begin with, it follows that the phenomenon of blind imitation has ended, once people who have lost their money in these currencies are unable to re-enter speculation, and therefore will not be a motivating factor for others to imitate.
On the other hand, there must be an accounting process that affects the markets, since cryptocurrencies are not monitored, and everything that is prohibited in regular markets is allowed in the digital currency market, and this leads to many institutions taking advantage of this situation and profiting from people who don’t know much about that field..
He emphasizes the importance of “government interference in the world of encryption, or putting an end to it by holding illegal institutions accountable, and the FTX incident could be a lesson in this field.”
However, CoinBase CEO Brian Armstrong had a different opinion, as he opined in an article he wrote on the “CNBC” website that “FTX’s decline occurred as a result of risky and unethical business practices, including conflicts of interest.” between interconnected entities, as well as decisions on lending clients’ assets without permission.”