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Binance has lost $12B in assets in under 60 days
- indigodaddy 4y agoWhy are customer deposited considered “assets” ? Is the money in my checking account included in the assets for my bank?
- unmole 4y agoCash that you deposit in a bank becomes the bank's asset. The money in your checking account is included in the bank's liabilities.
- boring_twenties 4y agoYes it is
- michael1999 4y agoYes. That is the heart of banking regulation.
- perfecthjrjth 4y agoCustomer deposits are liabilities for the bank.
- ShivShankaran 4y ago[dead]
- c7b 4y agoCustomer deposits are liabilities, but if the exchange acts as one would expect, each $ of liabilities has a corresponding $ of assets (ideally, in a segregated account, so that they're not considered the company's asset in the case of a default). But one may always doubt whether things are as they should, afaik Binance has never had a full audit report (not just proof-of-reserves or similar). Banks work a bit differently, btw, they should also have more $ assets than liabilities, but there's generally no direct 1:1 link as described above.
- complex_exp 4y ago> Banks work a bit differently, btw, they should also have more $ assets than liabilities, but there's generally no direct 1:1 link as described above. The total difference between assets and liabilities is the common stock (equity). This also shows why it's a very bad thing when the stock of a bank goes to zero, it means some liability will not be covered and thus the bank can be considered bankrupt. I'm simplifying here. From this point we can take a history tour to the 2008 meltdown, when we had this situation everywhere: bank A would short the common stock bank B because bank A had a lot of assets in bank B (which show up in bank B as liabilities). Bank B did the same thing to bank A for the same reasons. This is not as stupid as it sounds, because banks are not the only players in capital markets, using those shorts they essentially spread the default risk all over the equity markets. While this whole clusterfuck of nobody-trusts-nobody is going on the SEC comes out all of a sudden and bans the short sale of bank stocks, because shorting is evil or something. Imagine how much that made things worse after the only way to hedge entire banks going under was suddenly removed.
- c7b 4y agoI think you're confusing market capitalization and (accounting) equity here. What the stock price does does not directly affect the balance sheet (where you see the equity).
- complex_exp 4y agoI'm not confusing (the market cap and the book value), but rather simplifying things on purpose.
- jimjimjim 4y agowell, from the old double entry bookkeeping days: A deposit received by a company is recorded as both an asset and a liability of the same value. The assets are then used to create revenue and anything that has to be paid to the depositor are expenses. When the deposit is withdrawn, the asset and the liability both decrease.
- irjustin 4y agoI wouldn't look at Ripue and expect them to use the strictly correct accounting term. The full term is Assets Under Management so it's semi-understandable, but yes definitely not correct.
- ashwagary 4y agoIs it AUM if Binance doesn't "manage" anything for the vast majority of its customers? It's just a custodial wallet solution until a position is opened by the customer and even then Binance doesnt trade anything on their behalf.
- dragonwriter 4y ago> Is the money in my checking account included in the assets for my bank? The money in their vault is an asset, the balance in your account is a liability. When you deposit money, it creates both, though the asset by design doesn’t sit there for long in that form.
- cheriot 4y agoFunny how the replies are full of people explaining how bank deposits work. An exchange is not a bank. They're a custodian that holds something on the customer's behalf and facilitates trades. That crypto "exchanges" act like banks, but without any of the banking regulation we spent the last 100 years learning the hard way is why they keep failing. My stock broker and the NYSE can't secretly sell my shares and loan out the proceeds. They just hold the stock. That Crypto "exchanges" think of deposits as assets makes it clear they're more like a hedge fund than a bank or exchange.
- dragonwriter 4y ago> An exchange is not a bank. The hard distinctions between different types of financial institutions and their services, and most particularly the thing that makes every thing that holds money or other valuables on your behalf not effectively, like a (very sketchy) bank, are mostly a product of regulation.
- cheriot 4y agoYes, otherwise customers are just handing assets to someone and hoping for the best. That lack of assurance sets the stage for bank runs...
- mrep 4y ago> My stock broker and the NYSE can't secretly sell my shares and loan out the proceeds. They just hold the stock. Not in the business so I could be wrong but I believe they can loan shares to short sellers to sell and pocket the interest but they are also regulated which turns out is important.
- cheriot 4y agoThey need consent, but to your point it might be buried in some document. Some will provide compensation for it: https://www.interactivebrokers.com/en/pricing/stock-yield-enhancement-program.php https://www.interactivebrokers.com/en/pricing/stock-yield-en...
- xiphias2 4y agoIn your checking account yes. If you deposit money to safety deposit boxes, it's still in your posession, and the bank just stores it for you.
- 1vuio0pswjnm7 4y agoToo many question, lol. https://finance.yahoo.com/news/binance-doesn-t-headquarters-because-164521105.html https://finance.yahoo.com/news/binance-doesn-t-headquarters-...
- SPORTSCRYPO 4y ago[dead]
- dingusdew 4y agoConsidering cryptocurrency seemed to originally be a rejection of the traditional banking system, wherein you put your savings in someone else's hands, and instead having your own secured "wallet" that is always securely in your own hands... it always confuses me a little bit at how quickly the crypto space lunged headlong into essentially recreating banks and once again having large numbers of people put their savings in someone else's hands instead of having personal control over their finance. Are hardware wallets that difficult and/or expensive? Or am I missing something that crypto exchanges offer that I am fundamentally misunderstanding? Because it seems like this keeps happening with these exchanges and that these were the kind of things crypto was supposed to be preventing, not doing.
- stouset 4y ago> Are hardware wallets that difficult and/or expensive? The entire thing is obscenely difficult and completely inscrutable for the average human. The number of ways a naïve participant can lose their entire balance is staggering. Even the notion of a hardware wallet is something that 90%+ of people holding cryptocurrencies will either never hear about, never understand, or never opt to use due to actual or perceived complexity. The average person is simply not qualified to hold onto substantial (to themselves) amounts of cryptocurrencies in any form. And as it turns out, all of the available evidence seems to indicate that most exchanges aren't qualified to do so either.
- kkielhofner 4y agoNailed it. I’m waiting for the inevitable wave of social media posts, etc from all of the people who will lose access to their wallets, have them hacked somehow, etc. I’m sure centralized exchanges are already being flooded with customer support issues from people who don’t fully grasp what self-custody is and the risk it entails. Most people aren’t qualified or capable to build a fortress with medieval-castle or Fort Knox levels of security and process for their crypto wallets but that’s more equivalent than not of what’s required to properly secure them and maintain access over time. The general population hasn’t experienced “you’re completely on your own” for nearly anything in at least a couple of generations - and for good reason because it’s absurd.
- 5350-uiop-1130 4y ago"In less than two months, nearly a quarter of Binance's assets have left the exchange." note sure if the irony was intentional or not - but made me laugh.
- satvikpendem 4y agoWhat is the irony? I seem to be missing it.
- ShivShankaran 4y ago[dead]
- roundandround 4y agoOrwellian doublespeak of an Exchange that goes broke when everyone uses it like an Exchange instead of a Broker or Bank? Perhaps there's a commodities market or something that requires traders to pump assets into accounts that sit on the exchange itself and would somehow have direct fluidity problems if they stopped, but it seems like the wrong term to me.
- 5350-uiop-1130 4y ago"a quarter of Binance's assets" Are they Binance's assets or the users assets?
- satvikpendem 4y agoWhat is ironic about that question? I think people just don't know what the word irony means anymore.
- 5350-uiop-1130 4y agoIt's ironic because of a court ruling that FTX and Celsius deposits no longer belong to the users. And don't make assumptions about what i know or don't know. very arrogant.
- codehalo 4y agoThose assets are not Binance's to "lose".
- mouse_ 4y agoEvery central bank, incl. Wells Fargo, Bank of America, Citigroup etc. utilizes fractional reserve.
- webkike 4y agoThose are banks, not crypto exchanges. Fundamentally different. Additionally, fractional reserve banks are FDIC insured up to $250,000 of an account.
- dantheman 4y agoAnd fractional reserve banking is just legalized fraud. Demand deposits should not be loaned out.
- babypuncher 4y agoI could maybe understand the argument that fractional reserve banking is fraud, if it weren't for the fact that deposits are legally required to be insured by the bank.
- mouse_ 4y agoIn 1974, FDIC insurance backed up to $100,000, or almost three median new houses sold that year. Now, it is $250,000, or just a little over half the median price of a new home. https://fred.stlouisfed.org/series/MSPNHSUS https://fred.stlouisfed.org/series/MSPNHSUS The value of that insurance has gone down significantly over time because of inflation.
- webkike 4y agoThat does not actually indicate anything about the insurance limit not matching inflation because housing prices are not necessarily flat. In fact they are not. However, the fdic insurance limit is indeed worth less now, but most people don’t even have $5,000 in the bank. The mean bank account balance is $40,000 according to a quick Google search.
- c7b 4y agoWould be interesting to know the breakdown how many of those withdrawals were on-chain versus fiat.
- LatteLazy 4y agoIt lost nothing. It held those assets in good faith and returned them when asked. It never owned them. And the assets still exist. Clickbait bullshit.
- stjohnswarts 4y agoLol until like FTX they get caught overleveraged because of a panic and those "assets" go to zero because their creditors get preferred for repayment over "those with assets" in binance.
- LatteLazy 4y agoLike I said, they have not lost anything. They might in the future, like anyone. But right now? No.
- axus 4y agoE-trade has lost $10B in assets in under 20 days
- LatteLazy 4y agoWho are E trade? Edit: The stock broker that went bankrupt in 2020?
- seydor 4y agoBinance would be losing 'trust' if they were moving their 'assets' from binance to another exchange. this seems to be part of the global de-investment though
- PeterisP 4y ago[flagged]
- LarryMullins 4y ago[flagged]
- deleted 4y ago[deleted]
- olalonde 4y agoAlternative title: "Binance successfully clears $12B in liabilities in under 60 days"
- timerol 4y agoI'd prefer "Binance processes $12B in withdrawals in under 60 days". It's newsworthy both because total assets invested in crypto is falling, and because Binance is still processing withdrawals successfully after over 15% of AUM were withdrawn.
- MuffinFlavored 4y agoWhat’s their AUM now? Do we know it?
- olalonde 4y agoAUC (Assets Under Custody) would be a more accurate term here.
- trog 4y agoSure, but - Binance will successfully be able to clear their liabilities right up until the first person tries to withdraw a single dollar and it fails because they don't have any left. At which point it will probably go to zero in an unrecoverable way. One of the big issues with Binance (as I understand it, as a mere tourist) is that /nobody knows/ how much actual money they have. They might have $12B + $1, or they might have $60B, or whatever. There is a lot of faith, backed by little evidence, that they have enough actual capital to cover their liabilities.
- eaurouge 4y agoYou have zero visibility into the operations of traditional private businesses. With Binance, you can at least view their wallet balances, in the 10s of billions. You can also estimate their annual revenues. I would recommend doing both. You may find it illuminating. Really, we should all try similar research before commenting on crypto. It would make for much more intelligent discussions. And I don’t mean to pick on you. But too often I read comments here like: “I don’t know much about crypto, but I’m confident that … (insert choice assertion)”.
- chris123 4y agoNobody should leave Bitcoin on exchanges. When you do that, you're asking for trouble, all you own is an IOU.
- sgammon 4y agonow do coinbase
- fastball 4y agoWhy does the article keep calling people "Binance investors"? These are not investors in Binance, they are traders trading on a cryptocurrency exchange and withdrawing deposits.