Stay optimistic about FUD, Binance's resilience to "external pressure" in its 6th year has contributed to the growth of Web3.
This year's encryption market has encountered unprecedented difficulties.
Externally, there are global central banks, especially the Federal Reserve's interest rate hikes and balance sheet reductions (which have not yet stopped), and off-exchange liquidity has decreased with insufficient incremental funds. Internally, top-tier trading platforms such as Binance and Coinbase have been sued by the U.S. SEC, causing widespread panic, market makers to withdraw, thinning on-exchange liquidity, and a decrease in market depth. According to data from Kaiko, since the beginning of this year, the market depth of Bitcoin has decreased by 20%.
Under the double pressure from within and outside, various types of FUD (fear, uncertainty, and doubt) keep emerging, intending to disrupt the market and take advantage of the chaotic situation. Binance, as the world's largest cryptocurrency exchange, has become the top target for FUD attacks, with various rumors such as "Binance sued by SEC and shut down", "mass layoffs", "backdoor listing", and "decrease in Binance's market share" flying around, some of which were even fueled by globally renowned financial media. Eventually, the fluctuation in market sentiment translated into price volatility, with sharp ups and downs occurring more frequently, and retail investors becoming the ultimate "buyers" in the volatility.
Facing the doubts, CZ, the founder of Binance, always responds promptly by writing articles, urging the market to ignore FUD. At the same time, he also knows that actions speak louder than words, and the best way to counter rumors is to present facts. Binance has always been actively promoting compliance processes in other regions worldwide. It has obtained a digital asset operator license from the Thai Ministry of Finance, and the compliance exchange in Kazakhstan has been officially launched. Binance has also successfully acquired a licensed exchange in Japan and plans to make new progress this year.
In addition, during the market downturn, Binance still persists in building the crypto industry. On one hand, it improves the underlying infrastructure development, launching the distributed storage solution BNB Greenfield and Layer 2 scaling solution opBNB, while increasing investment to support various Web 3 projects. On the other hand, it actively creates new industry trends, introducing fresh blood into the market through blockchain education and expanding the influence of the Web 3 world.
"The crypto winter may last at least 18 months. We are actively preparing for the trading system to cope with the coming bull market." In a recent Twitter Space, CZ revealed that Binance is preparing for higher trading activities and also sent a signal that Binance remains strong to the market.
1. Deep in the FUD whirlpool, Binance responds directly
" 4 " has become a new popular "code" in the crypto community.
This meme originates from CZ's tweet at the beginning of the year, where he mentioned that this year's focus will be on four things: "1. Education; 2. Compliance; 3. Products and services; 4. Ignoring FUD, fake news, and attacks, etc." Since then, CZ frequently tweets the number " 4 ", sometimes with a selfie, as a quick way to express the meaning. This code has since been widely spread and became a new symbol of crypto culture.
CZ's selfie with the number " 4 "
As a big player, CZ's prediction at the beginning of the year has been proven, and this year Binance has been attacked by various types of FUD, especially after the SEC incident in June. Recently, there have been several rumors surrounding Binance.
FUD 1: "CZ and Binance are sued by the SEC for violating securities laws, and may face imprisonment. Binance will be shut down."
Firstly, the SEC's violation of securities laws seems more like a pocket crime. Many crypto projects, including Kraken, have been accused of the same, and most of these cases have been settled with cryptocurrency compensation. Only a few have faced criminal charges for "fraudulent investment". Currently, CZ has not faced any criminal charges. Binance is actively defending itself and has hired former US Assistant Deputy Attorney General M. Kendall Day as its lawyer for the lawsuit initiated by the SEC.
Furthermore, after the bankruptcy of FTX, the SEC's enforcement actions against cryptocurrencies have been increasing, reaching a total of 19, nearly double compared to before. Even Coinbase, which claims to be the most compliant trading platform in the US, has not escaped these actions. As a leading player in the cryptocurrency industry, Binance has also suffered greatly. The battle between regulatory agencies and the entire crypto industry is like a frontline fighter, with Binance and Coinbase attracting the most attention. If they fail, the future of the entire crypto industry will be in darkness.
"If they take the time to really understand our industry, they will find that there are almost no other global trading platforms or offshore companies that comply like Binance does." Binance co-founder He Yi said in an interview with Bloomberg, "We respect the attitude of regulatory authorities, whether they support or oppose the development of cryptocurrencies. I understand that the overall intent of regulation is good for the protection of investors. The global regulatory trend is inevitable, and it is not something that can be solved by shouting slogans of struggle."
FUD 2: "SEC lawsuit leads to asset freeze and shutdown of Binance.US"
The SEC attempted to freeze the assets of Binance.US but failed, and there is no evidence that they misused customer assets. The case is still under review, and Binance.US is actively defending itself and has hired former co-director of the SEC Enforcement Division, George Canellos, as its lawyer.
Furthermore, Binance.US has never stopped withdrawals, it only discontinued support for USD deposits and trading pairs. The issue of delays in USD withdrawals has been resolved in late June, and Binance.US is still operating. However, due to the lawsuit, Binance.US market share in the US has dropped to 2.7%, the lowest level since December 2020.
FUD 3: "Binance Faces Another Investigation as Executives Resign"
According to Fortune, Binance's Chief Strategy Officer Patrick Hillman, Senior Vice President of Compliance Steven Christie, and Legal Counsel Hon Ng have resigned. The article states that these executive departures are due to an ongoing investigation by the US Department of Justice into Binance's alleged money laundering, sanctions violations, and attempts to deceive US regulatory agencies. This news has caused market panic. The Wall Street Journal reported that Binance has already fired some US employees and is planning to reduce the number of local employees in the US.
However, the reality is not as speculated by some media outlets. Following the publication of the article, the departing executives have responded one after another, stating that the reports are untrue and that their resignations were mainly due to personal reasons. Patrick Hillman stated, "I still respect and support @cz_binance and am grateful for the opportunity to work under his leadership. I have been working here for two years, and now it is time to embrace the next challenge. I will continue to support my colleagues at Binance." Steven Christie also posted on social media, "My departure is far from what the articles describe. I have had a pleasant time at Binance. I have learned more during this period than any other time in my professional career."
CZ also responded on Twitter, stating that staff turnover is common in every company, but the reasons exaggerated by the news are completely wrong. "With the changes in the market and the global cryptocurrency environment, as well as the development of our platform and personal circumstances, every company will experience staff turnover. We appreciate the contributions made by all departing team members to our growth and wish them all the best. We also congratulate the team members who are growing in new roles. They are truly high-quality talents. We will continue to build and continue to recruit."
FUD 4: "Binance Triggers a Withdrawal Trend, Market Share Declines, and Losing Its Leading Position"
According to DeFiLlama data, after facing SEC lawsuits, market panic led to a significant outflow of funds from Binance. The total assets dropped from $64.1 billion on June 5th to $54.7 billion on June 15th. However, in the following two weeks, as traditional financial giants like BlackRock applied for spot ETFs and sparked market sentiment, Binance once again became the preferred choice for investors, and the total assets rose to a peak of $62.7 billion on July 12th, basically recovering the lost ground. The following chart illustrates this:
If we look at the net fund inflows, over the past month Binance had a net inflow of $2.01 billion, ranking first; Bybit, ranking second, had a net inflow of $280 million, which is only 14% of Binance's net inflow. As shown below:
Data for July 13th
Of course, the above data is for reference only, as fund flows can sometimes be related to arbitrage activities. Especially during periods of intense price fluctuations, many arbitrage traders transfer large amounts of funds between various trading platforms, often several times higher than usual. For reference, Binance had a net outflow of over $7 billion within one day after FTX's bankruptcy in November last year, but in the following days, net inflows reached nearly $10 billion.
In addition, according to data from Muse Labs, the proportion of BTC and ETH held in Binance addresses has gradually increased in the entire industry. The proportion of BTC increased from 24.3% at the beginning of the year to 26.9%, while Coinbase's proportion of BTC decreased from 21.2% to 20.1% during the same period; the proportion of ETH increased from 23.9% to 27.7%, while Coinbase's proportion of ETH decreased from 21.7% to 20.9%, as shown below:
FUD 5: "Controversy over listing, poor performance of newly listed coins"
In the bear market of the entire cryptocurrency market, several projects launched by Binance Launchpad and Launchpool this year have gained considerable wealth effects and received widespread attention from the market. There are also some unscrupulous individuals who falsely claim in the name of "friends" or "close friends" of the Binance founder that they can obtain investment quotas or guarantee the listing of projects on the Binance platform in order to seek profits.
Recently, He Yi clarified the rumors about "Close Friend Xiaomei" on her social media and called on investors to beware of being deceived. "Listing on Binance is not determined by one person, and we try to take into account the needs of the majority of users in the listing logic." He Yi further explained that the underlying logic of listing on Binance is to prioritize projects that can survive for a relatively long time and bring returns to users. "This is actually the gap in research and investment capabilities and aesthetic differences. The platform that can identify suitable listing projects and timing in the long run, its users can survive longer. This is the core competitiveness of the platform."
CZ also stated in a Twitter Space speech, "What Binance values most in listing is whether the project has a real user base and real application scenarios. If not, then factors such as the team and history will be considered. Binance does not want projects listed with Binance users as the seed users, as this carries substantial risks." In addition, CZ also stated that rather than overly considering how to be listed on Binance, it is better to focus energy on long-term product development.
In response to the poor performance of certain coins after being listed on Binance and the phenomenon of extreme price fluctuations of some small coins, He Yi stated, "The wallets of Launchpad project parties and market makers are being monitored, and as part of mutual supervision, the tokens of Launchpad projects currently require multiple custody by the project parties." Regarding the continuous decline in the price of tokens listed recently, He Yi responded that the market conditions are sluggish and the prices of both large and small tokens listed recently are falling. The prices of most altcoins in the market have dropped by 80%-90%, including all highly anticipated top-tier projects. Some IEO projects have increased by 10 times or 20 times after listing, which does not match the current market situation. She urged users not to blindly trust community price forecasts and chase after high prices.
In addition to the above main FUDs, there are also rumors surrounding Binance such as "market manipulation" and "employee insider trading". Binance has responded to these rumors multiple times. CZ once stated that Binance has strict internal controls, and no matter how high-level an employee is, they must hold their positions for more than 90 days before they can trade (previously it was 30 days).
2. Bear market hibernation, continuous cultivation
Whenever there are doubts, Binance always responds quickly, calling on the market to ignore FUD, but the best way to counter rumors is to speak with facts.
1. In terms of compliance, Binance is actively promoting compliance processes in regions outside the US market.
Currently, the SEC and CFTC in the US are constantly debating over the regulatory authority for cryptocurrencies. The US market lacks a comprehensive regulatory framework, and compliance and operational costs for cryptocurrency companies are increasing, leading to a gradual shift away from the US market. Hong Kong has become a cryptocurrency-friendly city this year, opening up cryptocurrency license applications, which undoubtedly provides a good alternative for Binance. According to Tencent News' "Qian Wang" report, Binance has already started engaging with regulatory authorities in Hong Kong and has participated in consultations with the Hong Kong Monetary Authority on cryptocurrency and stablecoin regulations.
In May of this year, Binance also obtained a digital asset operator license in Thailand, which is its first license in Southeast Asia. The license was granted to Binance's new joint venture, Gulf Binance, which will operate as a digital asset exchange and broker with technical support from Binance. In the European region, Binance will register in six European Union member states, including France, Italy, Poland, and Spain, to comply with the Anti-Money Laundering requirements of the "MiCA Regulation" and accelerate the transition to MiCA. Additionally, Binance has made recent progress and implementation in applying for local exchanges in Japan and Kazakhstan to provide cryptocurrency services to the local market.
2. The BNB Chain integrates "governance security, smart contracts, storage, and scalability" into one.
In addition, during the market downturn, Binance continues to build the cryptocurrency industry, improve underlying infrastructure development, and launch the distributed storage solution BNB Greenfield and Layer 2 scaling solution opBNB. At the same time, Binance is increasing investment to support various Web 3 projects.
On February 1st this year, BNB Chain released the BNB Greenfield whitepaper. The core of Greenfield is a storage chain and a network of storage nodes, consisting of the storage-oriented BNB Greenfield network and decentralized Storage Providers (SP) network. Users upload their data storage requests to BNB Greenfield, and SPs store the data off-chain. According to the deductions made by BNB Chain, domains such as website hosting, personal cloud storage, content payments, and social media can all utilize BNB Greenfield for storage purposes.
"By 2023, through the BNB Greenfield, BNB Chain will create a new theme for data ownership and utility. BNB Greenfield will bring utility and financial opportunities to data stored and programmability to data ownership. "BNB Chain's senior solution architect, Victor Genin, said."
If BNB Greenfield meets the storage needs, the Layer 2 network opBNB launched in June this year completely opens up the performance limitations of BNB Chain. opBNB is an EVM-compatible L2 scalability solution based on the Optimism OP Stack, greatly improving the scalability of L1 to reduce network congestion and fees, while maintaining similar security levels as L1. opBNB's innovative underlying combination includes optimized data accessibility, caching layers, and adjusted submission process algorithms, allowing more parallel operations, enabling opBNB to reach a gas limit of up to 100 M. Based on these comprehensive optimizations, opBNB can support over 4,000 transfer transactions per second, with an average transfer transaction cost of less than $0.005.
So far, in the entire BNB Chain ecosystem, BNB Beacon Chain focuses on BNB governance and security, BNB Smart Chain provides smart contract computation, BNB Greenfield provides decentralized storage, and opBNB solves scalability issues. Four in one, different directions, but all with BNB as the core value of the entire system.
3.Binance expands the industry through underlying infrastructure and education.
Binance actively creates new trends in the industry and introduces fresh blood to the market through blockchain education, expanding the influence of the Web 3 world.
Nowadays, the Web 3 on-chain ecosystem is constantly erupting, and users' learning needs are rapidly showing specialized and systematic characteristics. Simple popular science articles are far from meeting the needs of users. At the same time, the number of industry participants is experiencing an explosive growth trend: including technology or project enthusiasts, practitioners, etc. The growing number of these participants has also brought about more demand for Web 3 education. Binance, DCG, a16z, Sequoia, and others have successively laid out this track.
In particular, CZ ranked education first in his tweet earlier this year, which shows its importance in his mind. Since then, CZ has repeatedly emphasized the importance of Web 3 education in various occasions and AMAs, stating that "Binance has not done well enough in the education field, so education is something Binance should pay attention to." In addition to verbal attention, Binance is also actively promoting Web 3 education. For example, Binance Academy has been dedicated to popularizing Web 3, providing users with all the content related to cryptocurrency and blockchain, and is one of the largest and most comprehensive online cryptocurrency libraries in the world.
Three, after six years of entrepreneurship, we start anew
1. 1 out of 66 people worldwide is a Binance user
Since the birth of Bitcoin in 2008, the entire history of crypto finance has only been 15 years. With market fluctuations, the majority of crypto companies have gone extinct before reaching the three-year mark, with an average lifespan of less than 3 years. However, Binance has not only survived since its inception, but also experienced rapid development. It has expanded beyond just trading and become a comprehensive crypto conglomerate, with employees in over 110 countries worldwide.
According to the CCData report, in June of this year, CEX spot trading volume increased by 16.4% to $575 billion, with Binance accounting for 41.6% and ranking first. In June, CEX derivatives trading volume increased by 13.7% to $2.13 trillion, and Binance remains the largest crypto derivatives trading platform, with a trading volume of $1.21 trillion in June, accounting for 56.8%. According to official data from Binance, as of July this year, Binance supports 18 languages for its services, and the number of users who have been KYC certified has surpassed 120 million, which means that 1 out of 66 people worldwide is a Binance user.
After becoming a leading player in the trading business, in order to meet the demand for more innovative blockchain products, Binance has been continuously expanding its business boundaries, exploring new growth points, and diversifying its development. It has evolved into a comprehensive blockchain group, mainly focusing on investment, technology research and development (public chains), wealth management, stablecoins, NFTs, payments, and charity, among other dimensions. For example, in terms of investment, since 2018, Binance Labs has invested in and incubated over 200 projects worldwide, with a focus on infrastructure, decentralized finance (DeFi), gaming and metaverse, social finance (SocialFi), crypto fintech, as well as developer applications and tools. Binance Labs' investment covers various aspects including infrastructure, product applications, Web 3 tools, etc. Representative projects include Polygon, GOMBLE, SafePal, Sui, and many other high-quality projects.
2. Ecosystem Breaks Boundaries and Knows No Limits
After achieving success, Binance always keeps the principle of putting users first and prioritizing user benefits.
Recently, the Rug Pull project XIRTAM transferred the raised 1909 ETH to Binance exchange, and Binance promptly assisted in freezing the funds. For over a month, Binance security team has been working tirelessly to communicate and address issues related to the XIRTAM project. Finally, Binance announced that Binance users affected by the XIRTAM incident can submit specific information through a form until August 2, 2023, to apply for the return of XIRTAM assets. Once the affected accounts are verified, the Binance security team will return the corresponding ETH assets to eligible users through a smart contract address.
"Everything we have achieved today is built on trust from our users. We have always made user-centricity our core value. Everything we do is to tell our users: we are worthy of the trust you have given us for a long time. While driving industry development and innovation in a sustainable and responsible way, we must also protect our users." said CZ.
Especially after the bankruptcy of FTX last year, the asset reserve issue of CEX has received much attention. Binance also promptly disclosed the exchange account addresses to display its reserve status. In addition, Binance's promoted Merkle Tree reserve proof has been recognized by other centralized platforms. Various platforms have conducted audits using this solution and made them public on their official websites. It is worth mentioning that Binance's reserve proof only covers 8 main assets, including BTC, ETH, BNB, LTC, USDC, USDT, XRP, and BUSD, which is the most diverse category among exchanges - other platforms mostly involve only BTC, ETH, and USDT. According to Binance's 8th reserve proof released on July 1st, the reserve ratios of the aforementioned 8 assets are all above 100%.
Currently, the scale of the crypto financial market is only 1 trillion dollars, which has strong growth potential compared to traditional markets. Many people are still unaware of Web 3 and its impact. How to attract users to this new field and bring incremental value to the crypto market is a question that all Web 3 practitioners are pondering. From the very beginning, Binance has been committed to expanding the industry because CZ and other founders believe that only with a larger industry can there be more opportunities.
"For us, it is crucial to develop this industry as the market is still young. The larger the industry becomes, the more opportunities there will be."
People participate, and there will be more opportunities in this industry. If you are the only participant, then you are in the wrong industry. We hope that Binance will become the gateway to the Web 3 world, providing a range of simple, accessible, compliant, and trusted tools for billions of users entering the new Web 3 world."Conclusion
The external regulatory pressure currently faced has not knocked down Binance. Because CZ believes that external pressure is an important tool to temper the team and enhance cohesion and combat effectiveness.
"I am frequently asked about the best way to build a close and strong team, and the secret is some external pressure. Fighting side by side is the best way to build a close-knit team, as it creates dependency, alliances, resilience, and, most importantly, trust among team members. We have always faced external pressure, FUD, etc., so we continue to fight together. This, in turn, makes us more determined to move forward with our mission and increase financial freedom for people around the world."
Regarding the future direction of the cryptocurrency market, CZ stated that in the long run, he still has confidence in cryptocurrencies and expects an increase in cryptocurrency trading volume in the next 6 to 18 months. Binance is actively preparing for this. "The crypto winter may last at least 18 months. We are actively preparing for the trading system to be ready for the coming bull market."
