Binance’s emergency insurance fund largely consists of one, according to on-chain data cryptocurrencywhich is tied to the company itself.
The two addresses associated with the fund show that its BNB tokens account for 44% of its reserves.
The wrong type of insurance?
As further shared by on-chain analyst Willy Woo Twitter, the Secure Asset Fund for Users (SAFU) includes BNB worth $367 million. The remainder is made up of the pegged to the dollar stablecoin BUSD ($300 million) from Binance and Bitcointhe largest cryptocurrency after market capitalization ($270 million), combined.
These balances are due to public Blockchain-Data verifiable at Binance Bitcoin and BSC Addresses respectively The exchange soon plans to implement a system to prove the reserves, which will also check all their exchange assets.
Still, Woo found Binance’s reliance on BNB within the reserve worrying.
“While I commend Binance for having such a fund, there is no point in putting incidence-correlated BNB in there,” he said. “How would we feel about FTX having an insurance fund filled with FTT?”
The SAFU was established in 2018 to protect Binance users’ funds in the event of a disaster. After slowly being funded by trading fees collected by Binance, it officially opened in January 2022 with a valuation of $1 billion. The decline in the crypto market has since pushed the spot market valuation to around $837 million.
These funds still roughly equate to the $68 million in Binance’s reserve balance today, combined with the estimated $800 million in Binance Custody. But further volatility, particularly at BNB, could push SAFU’s valuation way down when it counts – especially since its success is directly related to Binance’s stability and success.
BNB vs FTT
BNB gives holders discounts on trading fees when exchanging crypto on Binance. In this way, it is similar to FTX’s FTT token, but with a much larger market cap.
FTT once made up a significant portion of Alameda Research’s total assets, according to the leaked balance sheet earlier this month. The trading company went under with its sister exchange on Nov. 11 after Binance CEO Chanpeng Zhao threatened to throw the token on the market. Its price has since plummeted from over $22 on November 6th to under $2 at the time of writing.
the Solana-Foundation, endowment uncovered on Monday that it held over $70 million in financial transaction risk earlier this month. The remaining tokens, now worth much less, are still trapped in FTX.
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Source: Crypto News Deutsch