Why users are pushing back against the world’s largest crypto exchange.
On platforms like Binance, traders are taking unprecedented risks. Some have had enough.
On May 19, 2021, Francis Kim thought he had hit it big. The Australia-based entrepreneur had been dabbling in derivatives trading in regulated markets, and he was used to their relative volatility. Now, rút tiền binance mất bao lâu however, he was trying his hand in the Wild West of finance: cryptocurrency futures. He had begun trading on a crypto exchange called đánh giá binance ireland
only a month prior with less than $20,000, when bitcoin and 바이 낸스를 만든 사람 Ethereum (the two most popular cryptocurrencies) were at then-all-time highs. Kim thought their prices would fall, and using leverage — essentially borrowing from the exchange to risk more on a trade — he put his money on the line. What he would soon find out is how, in the topsy-turvy world of crypto trading, a person can be right about the market and still lose it all.
Perhaps the most remarkable characteristic of Binance, the exchange Kim was using to place his bets, is its size: In terms of volume, Binance is the largest crypto exchange in the world by a wide margin, regularly processing tens of billions of dollars in transactions per day. (There is a Binance U.S. exchange, but in terms of activity, it’s dwarfed by what’s sometimes referred to as "Binance global.") Binance has four times the spot trading volume of its nearest competitor on a typical day, and its activities potentially have wide influence across this globally interconnected industry.
Binance allows its customers to employ enormous leverage — at one point up to 125 to 1 (now down to 20 to 1 for most customers, comparable to other exchanges). That means everyday people, or "retail traders," can gamble with far more chips than they actually bought. The upside is large, but so is the downside: At 125 to 1, for every 1 percent move, your $100 bet could more than double, or you could get wiped out instantaneously. Kim was trading with 30 to 1 leverage.
In mainstream financial markets, offering extreme amounts of leverage to retail traders — not accredited investors who must prove they have the funds to withstand a margin call — is not allowed, a rule meant primarily to protect inexperienced traders from themselves. (The popular online brokerage Robinhood, for instance, offers loans to customers to buy stock, but nowhere near the amount that Binance once offered.) So why would Binance, along with some competing exchanges, allow such sky-high leverage? According to experts such as Carol Alexander, a professor of finance at Sussex University Business School, it may be because, like some of its competitors, Binance plays a number of roles that may pose conflicts of interest.
As Alexander points out, Binance is not just an exchange where people can buy and sell crypto. The company, whose valuation some employees claim may be as high as $300 billion, is practically its own vertically integrated crypto economy, offering crypto loans and the widest selection of tokens. If that weren’t enough, Binance itself trades on its own exchange. In traditional markets, this kind of arrangement would never be allowed, бинанце лите преглед as the conflicts of interest — and potential for market manipulation — are glaring. Imagine the New York Stock Exchange or Nasdaq taking positions on different sides of trades it facilitates. No financial regulator would allow it, for obvious reasons. ("Market making activities are standard in both traditional finance and crypto," a Binance representative said in response to a question about whether the company trades on its own platform. "They ensure liquidity and directly support a healthy, vibrant, and efficient marketplace to the benefit of end users.")
But for cryptocurrencies, this is how the whole market works, especially since much of it is based in offshore jurisdictions and operates in legal and regulatory gray areas. "It’s not just Binance," said Alexander. Practically all crypto exchanges occupy these varied, potentially conflicting roles, which in conventional markets are divided up between different entities. "And they’re completely unregulated," she said. The lack of government oversight, жетон медведя binance combined with the conflicts, will become more of an issue as cryptocurrencies grow increasingly mainstream, advertised on every possible medium and traded in retirement portfolios. Even relatively savvy investors stand to lose everything on risks they could never take in another circumstance.
This was the situation Francis Kim had put himself into when he took out a bitcoin short position on Binance. Whether by luck or skill, his bet soon proved right — or seemed to. In the first few weeks of May, the price of bitcoin fell from $58,000 per coin to $40,000. On May 19, it collapsed, with the slide even steeper on Binance’s trading platform (crypto prices can vary slightly among platforms, offering arbitrage opportunities for sophisticated traders). As Kim watched on his phone screen, the price per bitcoin fell in minutes from $38,000 to $30,000. And as the market tanked, his short position exploded, its value growing from $30,000 to $171,000. Time to cash out: All he had to do was click a button on the Binance app to lock in his gains.
But the app wouldn’t respond. Experienced in online trading, Kim switched to the two other Internet connections he had installed as backups in his house. None of them got the app to work. "So I’m just going there, going crazy, going click click click , you know, trying to close out of that position, to lock in the profits," he told us. "And you know, I jump on Twitter. Other people are having similar issues."
Flash crashes in crypto markets tend to be accompanied by technical snafus or unexplained outages, including an inability to withdraw funds. On Sept. 7, 2021, for example, faʻafefea ona faʻatau bitcoin i le bitcoin masini when El Salvador introduced bitcoin as a form of legal tender — despite social protests and technical issues with the Chivo app designed for Salvadoran citizens to access their coins — a marketwide slide led to a number of exchanges reporting transaction delays and other problems. Similarly, Binance users report regular technical issues, with Tesla chief executive Elon Musk publicly criticizing the exchange recently for an issue that prevented traders from withdrawing Dogecoin for at least two weeks. (A Binance representative said that "the Dogecoin withdrawal issue was an unlikely and unfortunate coincidence for Binance and the DOGE network" and pointed out that "the technical issue was resolved.")
On the other side of the world last May, in Toronto, Fawaz Ahmed, a 33-year-old trader, was having the same experience as Kim, усдт м бинанце but from the opposite end of the gamble. Over the past year, also using leverage, Ahmed had ridden the crypto wave up, turning an initial stake of 1,250 Ethereum tokens into 3,300 that were eventually worth more than $13 million. (He said he started trading in 2017 with about $25,000.) Ahmed was betting that the crypto market would continue its overall rise, though he said he planned to cash out if the price of Ethereum reached $4,100. Like Kim, Ahmed expected some volatility along the way, but it was only on May 19, when Ethereum plunged dramatically alongside bitcoin and other currencies, that Ahmed realized the gravity of his situation. He needed to close his position, and fast.
For an hour he frantically tried to get out, but just as for Kim, the app wouldn’t work. "I saw my position get liquidated," said Ahmed, referring to a margin call that happened while the app was unresponsive. "It was right in front of my eyes." Just like that, Ahmed’s eight-figure crypto fortune was gone. He described it as "one of the worst days of my life."
By the time the Binance app was back up and running some hours later, it was too late for both Kim and Ahmed.