Did traders flee Binance after its $4.3bn settlement? It’s complicated

Did Binance really see a billion dollars in outflows after it paid the US Department of Justice a $4.3 billion fine?

That’s the claim CNBC and other media outlets made in the wake of Binance’s historic settlement with US authorities, citing data from blockchain analysis firm Nansen.

But analysing Binance’s on-chain flows is tricky, analysts at Nansen and DefiLlama told DL News, due to the way the data itself is collected.

As a private company, Binance has no legal requirement to present audited financial statements to investors, like for example Coinbase, a publicly traded company.

Nor does it need to share its on-chain data with blockchain analysis firms if it doesn’t want to.

Shifting data

DefiLlama previously told DL News that although the site live-tracks the state of Binance’s reserves, the exchange regularly changes its wallet addresses and only periodically declares them.

A Nansen analyst echoed that sentiment, telling DL News:

“Binance updates their proof-of-reserves every month for everyone, and in addition to that Binance team contacts us directly to make sure everything is updated.”

“Most wallets remain the same for long periods of time. Usually adding a couple of new ones [and] removing a couple of old ones.”

While the data may provide insight into long-term trends for Binance flows, it’s tricky to use it to pin down flows for a specific day.

For example, a large inflow may be due to a wallet’s recent addition to the database, even if the wallet has existed for a while.

Similarly, what seems like outflows may simply be funds moving from a known wallet to an unknown one.

Analysing Binance flows

It’s worth noting that, if we take data provided by Binance to DefiLlama at face value, known Binance wallets experienced net outflows virtually every day since the DOJ settlement until Monday, December 4.

Binance’s known wallets processed $382 million in outflows on November 21, the day the settlement was announced.

An additional $333 million left known Binance wallets on November 22, and $554 million the next day, for a total of approximately $1.3 billion in outflows in those three days.

Over $2.8 billion exited wallets known to belong to Binance from November 21 until December 4. Whether these funds were simply reorganised within the exchange or exited the platform altogether is hard to say.

Even then, the numbers don’t seem particularly spectacular, as Binance has processed billions of dollars in flows on the same day on numerous occasions, including in early November.

“A couple of billions in [or] out is fine, historically,” said Nansen, adding that Binance exchange reserves usually float above $60 billion — at least in the data the company shares with the blockchain firm.

According to that set of data, Binance manages over $68 billion in assets. The resilience of the reserves can partially be explained by rising crypto prices.

Tom Carreras is a Markets Correspondent at DL News. Got a tip about Binance? Reach out at tcarreras@dlnews.com.