Cryptocurrency exchange Binance’s bitcoin (BTC) reserves dropped by $355 million last month, yet the customer balances surged by over $4 billion, aligning the two metrics more closely, based on recently disclosed exchange reserves data.
At the year’s start, Binance, the largest crypto exchange by trading volume, maintained 622,192 BTC across third-party custody and exchange balances. By February 1, this figure had decreased to 618,563 BTC. Conversely, customer net balances increased from 575,296 BTC to 615,816 BTC, indicating a drop in the collateralization ratio from 108% to 100%.
- Binance’s BTC reserves fell by $355 million in January while user balances rose by $4.4 billion.
- USDT reserves dropped by $25 million, despite user balances climbing by $2.6 billion.
- Currently, Binance possesses $160 billion worth of 34 crypto assets listed on the report, all held at a 1:1 or more ratio against user balances.
The specific reason for the changes in reserves remains unknown, and Binance has not yet commented on the matter. Its approach may involve reallocating funds for better return on investment, rather than being over-collateralized. Notably, Binance’s financial standing remains strong, with $160 billion in assets, all adequately backed against user balances.
The necessity for exchanges to post proof of reserves arose after the collapse of FTX in November 2022, which was triggered by a weak financial state involving illiquid altcoins, resulting in a ‘bank run’ where the exchange failed to meet customer withdrawal requests.
Following the FTX fall, a liquidation cascade affected the entire market, driving bitcoin down to a cycle low of $16,463, although it has since recovered to trade recently at around $97,373.
