1 year ago
CZ took to Twitter connected Nov. 8 sharing "two large lessons" that crypto companies should larn amid the downfall of crypto speech FTX.
Binance CEO Changpeng “CZ” Zhao has shared his instrumentality connected "two large lessons" to beryllium learned from the FTX saga, saying cryptocurrency firms shouldn’t usage their ain tokens arsenic collateral and should besides support “large reserves.”
In a Nov. 8 tweet, Zhao laid retired 2 learnings aft the important “liquidity crunch” astatine FTX which has yet resulted successful a non-binding missive of intent from Binance to get the struggling exchange.
Two large lessons:
1: Never usage a token you created arsenic collateral.
2: Don’t get if you tally a crypto business. Don't usage superior "efficiently". Have a ample reserve.
Binance has ne'er utilized BNB for collateral, and we person ne'er taken connected debt.
Stay #SAFU.
Zhao shared that his archetypal acquisition is to guarantee a firm's collateral should not dwell of a token that it has created, and claims his exchange’s token — Binance Coin (BNB) — has ne'er been utilized arsenic collateral for its services.
FTX’s liquidity issues appeared to person travel aft a Nov. 6 tweet from Zhao saying Binance would beryllium liquidating its holdings of FTX token (FTT) pursuing “recent revelations” related to reported ties betwixt FTX and the trading steadfast Alameda Research showing the steadfast had important FTT holdings.
While Binance does not presently disclose impervious of what reserves it uses arsenic collateral, Zhao mentioned successful a Nov. 8 tweet that successful an effort to beryllium afloat transparent Binance volition soon supply impervious of reserves, adding:
“Banks tally connected fractional reserves. Crypto exchanges should not.”Zhao’s 2nd acquisition from the downfall of FTX is that crypto businesses shouldn't beryllium borrowing, and alternatively should opt to support ample reserves — which could beryllium successful notation to FTX users complaining of sluggish withdrawals connected Nov. 7, sparking rumors the speech didn't person capable to screen idiosyncratic funds.
Related: Bitcoin terms hits 2-week lows arsenic FTX ‘bank run’ drains BTC reserves
Zhao's tweet confirming Binance's FTT holdings liquidation ended up triggering what immoderate called a “bank-run” connected the exchange, with analytics level CryptoQuant information revealing that FTX’s Bitcoin (BTC) balance had fallen by 19,956 connected Nov. 7 alone.
At the clip of writing, FTT is down 75% successful the past 24 hours, with the past terms astir $5.70 astatine the clip of penning compared to its opening terms of $22.14.
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