In a recent Twitter post, Travis Kling, a former long-short equity and portfolio manager, delved into the perplexing resilience of Binance, the world’s largest cryptocurrency exchange by trading volume. Despite setbacks and controversies, Binance has stayed afloat, puzzling many in the crypto community. Kling, known for his sharp insights, offers a few theories that might explain this phenomenon.
Kling refers to the ongoing Binance situation as a “Slow Train Wreck”, acknowledging the unusual timeline surrounding the exchange. Over the past several months, Binance has been embroiled in many negative events, ranging from regulatory crackdowns to questions about its Proof of Reserves (PoR). Yet, the exchange continues operating, leading many to wonder why it hasn’t collapsed.
According to Kling, one plausible explanation could be the personal wealth of Changpeng Zhao, commonly known as CZ, the CEO of Binance. CZ is a wealthy individual whose personal balance sheet might be buffering the withdrawals from the exchange. This financial cushion could be what’s keeping Binance from immediate collapse. However, Kling noted that this buffer may eventually run out, leading to a withdrawal halt.
Another possibility that Kling outlined is that Binance is on the brink of collapse, but the exact timeline remains uncertain. The exchange has not disclosed details about its customer deposit liabilities, and there are legitimate concerns about the accuracy of its PoR. Consequently, the collapse could happen sooner rather than later, within the year.
Moreover, Kling pointed out the cultural factors that may be at play, particularly among Asian crypto investors. Changpeng Zhao enjoys a strong reputation in Asia, especially in China, where he is highly regarded. Many Asian users of Binance may either be unaware of the unfolding events or may not fully grasp the gravity of the situation. This trust could be another factor contributing to the exchange’s resilience.
