We are in the midst of an ongoing legal battle with the US Securities and Exchange Commission (SEC). Changpeng Zhao (CZ), CEO of Bitcoin exchange Binance, took to Twitter to clarify concerns about the net outflow of funds from the popular cryptocurrency exchange. Let’s look at the details.
Statement reveals Bitcoin and fund outflows
CZ’s announcement came shortly after the SEC filed a lawsuit against Binance, accusing the exchange, its CEO, and its US arm of operating unregistered securities exchanges. In his tweet, the CEO of the Bitcoin exchange CZ highlights the difference between measuring net outflow and assets under management (AUM) in USD equivalent. On the other hand, he also shed light on the impact of sharp price movements and arbitrage traders on fund transfers between exchanges.
According to our data, last 24hrs, @Binance net outflow is about $392m.
Our wallet addresses are public. Some 3rd party analytics measure Change in AUM (asset under management) in USD equivalent as outflow. This would include crypto price drops (which decrease AUM) as "outflow".…
— CZ 🔶 Binance (@cz_binance) June 10, 2023
CZ’s tweet revealed that Binance’s net outflow in the last 24 hours was approximately $392 million. However, the CEO stressed that net outflow should not be considered the only indicator of asset loss for the stock market. It covers various factors that can significantly affect the overall AUM, including Bitcoin and crypto price drops.
Difference between net output and AUM
CZ argues that measuring outflows alone cannot provide a comprehensive understanding of the financial stability of Bitcoin exchange Binance. It also aims to correct misunderstandings. In this context, it calls on stakeholders to consider both entrances and exits. To clear up the confusion on the subject, CZ highlights the difference between net output and AUM. It specifically touches on the role of third-party analytics. These analyzes often rely on net output as a measure of a company’s financial well-being.
However, CZ states that AUM represents the total value of assets managed by Binance. On the other hand, he emphasizes the importance of recognizing that net outflow only reflects the movement of funds. CZ, the CEO of the Bitcoin exchange, aims to avoid misinterpretations by clarifying this distinction. It also aims to provide a more accurate assessment of Binance’s performance.
The impact of price movements and arbitrage trading
CZ’s tweet also sheds light on the impact of sharp price movements and arbitrageurs in the net exit equation. There is a trend during periods of high market volatility, such as today. Arbitrage traders tend to transfer substantial funds between exchanges. CZ emphasizes that these traders multiply on such days compared to normal trading conditions. He also points out that they are doing more transactions. As a result, increased Bitcoin and fiat currency trading volume contributes to the perceived higher net outflow. It also potentially distorts the real financial position of the stock market.
Bitcoin exchange Binance and SEC lawsuit
It’s worth noting that CZ’s tweet came at a critical point to coincide with the recent lawsuit filed by the SEC against Binance, CZ and the US arm of the exchange. The SEC states that Binance operates unregistered securities exchanges. He also claims to have sold securities without the necessary registration. cryptocoin.com As a result, the lawsuit has intensified the scrutiny surrounding Binance’s activities. On the other hand, it raised concerns about the exchange’s compliance with legal requirements.
