Eloisa Marchesoni
Eloisa Marchesoni 3 minutes reading from Bitcoin

CEX, Binance, Solvency: A Survival of Cryptocurrency Exchanges Under Fire

1/7🧵CEXs are under fire 🔥

It’s a survival of the fittest contest and crypto exchanges with good track records and simple business models have a head start.

(A thread)

2/7 🧵@jespow pointed out that @binance’s proofofreserves report is just an attempt at proving collateral rather than reserves 🚩, which is the trick FTX played before it blew up💥

@cz_binance says Binance has a strong balance sheet and that it will weather the storm 😏

3/7 🧵Solvency isn’t the only thing on users’ minds!

@krakenfxs KYC process is both simpler and faster than Binance’s. Withdrawal fees are low and the exchange does not operate its own token. Remember, FTX used its own token (FTT) to maintain Alameda’s toxic margin position.

4/7🧵 This is important because it reduces the risk for conflicts of interest down the line. Such a business model incentivizes an exchange to focus on providing a better service, not financializing assets which tends to lead to fractional reserve banking 😉

5/7🧵Speaking of reserves, CEXs have a lot of work ahead of them to attract pristine Bitcoin collateral, but BTC has been getting pulled out of exchanges since March 2020, so it’s not easy.

In the case of Kraken versus Binance, there is no comparison: Kraken wins! 🏆

6/7🧵This is true on at least three accounts: proofofreserves, the business model and general UX 🙌🏻

Finally, @cz_binance’s">@cz_binances recent @CNBC interview does not pass the smell test, regardless of the @binance exchange’s true financial situation.

Prudence dictates vigilance‼️

7/7🧵Keep your funds SAFU… on Kraken (but HODL using @Ledger or @Trezor only) 🤭

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This post is based on this twitter thread.


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