Binance is tackling to issue of proving where user funds are by using the third-party auditor Mazars, a leading Hong Kong-based auditing firm, to prove independently that user funds held by the exchange are safe and “untouched”. This is particularly important as users are demanding to know that funds are safe (or “SAFU”) and that they can trust the exchange to keep holding their funds. Auditing centralized exchanges help to ensure that they are compliant with applicable laws and regulations, as well as industry best practices. This helps to protect users from fraud, manipulation, and other malicious activities.
Binance BTC Reserves are Fully Backed
Mazars, an international audit, tax, and advisory firm, has confirmed that Binance has more than enough Bitcoin (BTC) to cover all customer deposits. The report verified a 101% collateralization ratio on 575,742 BTC in net customer deposits as first published on their proof-of-reserves system on November 25. All assets included customers’ spot, options, margin, futures, funding, loan and earn accounts for BTC and wrapped BTC circulating on the Bitcoin, Ethereum, BNB Chain, and BSC blockchains.
To ensure customers’ assets are not being lent out or stolen without permission, Binance implemented a Merkle Tree proof-of-reserves system that allows customers to independently verify the safety of their assets.
Binance Merkle Tree Proof-of-Reserves (Source: Binance)
Binance Securely Controls Custodial Wallets
Mazars has also asked Binance to perform transactions at specific times to prove that the wallets were actually under Binance’s control. This clarifies the situation in late November when Binance moved 127,351 BTC to an unknown wallet. According to the report, Mazars used Etherscan and BSCscan to check that the wallets indeed belong to Binance.
Moreover, Mazars reviewed the scripts that Binance uses to extract the total net deposits, making sure there was no duplicated or rigged user IDs. This confirms that Binance’s Merkle tree is built with open source script developed by Silver Sixpence.
What This Means for Investors
Binance is the world’s largest crypto exchange by trading volume, and is arguably the most used platform for all crypto users. After the collapse of FTX, Binance CEO Changpeng Zhao (CZ) was jokingly hailed as the “savior” of crypto, doing everything he can to repair the industry. However, Binance itself is no exception to scrutiny as a result of FTX’s collapse. People need to know what centralized exchanges are doing with their money.
Binance’s audit has cleared up a lot of doubt, restoring confidence in the exchange. However, there are still two issues raised by the crypto community:
A Step in the right direction
Overall, auditing centralized exchanges are essential for protecting users and ensuring that exchanges are operating in a safe and secure manner. By conducting regular audits, exchanges can help to ensure that their customers are protected and that they are getting the best possible service. Binance has also provided on-chain proof of funds using “Merkle” Proofs in November of 2022. This means that Binance has taken efforts to prove that both Fiat and Crypto deposits in their custody are safe.
FAQ
Is Mazars a reliable auditing firm?
While most of the community praises Binance’s initiative, several Crypto Twitter users expressed concerns that Mazars is not one of the “Big Four” accounting firms: Deloitte, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and KPMG. For the longest time, audits made by any one of the Big Four is the gold standard, and any other firms are deemed not “credible” enough. This is reasonable enough seeing as FTX was in fact audited by smaller accounting firms. But that might not be the case for Mazars. Founded in 1945, Mazars is one of Europe’s largest audit and accounting firms with global presence. In fact, Mazars was a longtime accountacy firm for former president Donald Trump. But after finding out Trump’s business filings were not adding up, Mazars cut ties with his business. Given their track record, it is safe to say that Mazars is reliable as they conduct due diligence on any business.
Binance audit only accounts for BTC reserves
The audit only focuses on BTC assets for now. As of now, Binance does not have a proof-of-reserves system for other cryptocurrencies. But at the end of the day, this is a big step towards a more transparent ecosystem. Let’s hope there will be more developments in the coming weeks.
Ledger, one of the top hardware wallet providers, has announced the launch of its new Ledger Stax wallet in partnership with Tony Fadell, co-creator of the iPod and iPhone. This is a significant initiative as Fadell being one of the world’s foremost tech engineer is stepping in to bring clarity and confidence to owning digital assets following the collapse of FTX.
Pre-order your Ledger Stax Wallet here!
Key Features of Ledger Stax Wallet
Fadell realized that existing hardware wallets are difficult to use for mass consumers. Therefore, he drew inspiration from his iPod design to bring a more user-friendly experience for wallet users.
Ledger Stax resembles a small smartphone and has a monochromatic E ink display which covers the front and curves around the spine. That way users can easily view complete transaction details as well as their NFT collections even when the wallet is off. This works in conjunction with integrated magnets, allowing multiple Stax devices to stack, hence its name. This is particularly useful for Ledger owners who have different portfolios since they can look at the labels displayed on the spine, like books on a shelf.
Stackable Ledger Stax wallets with displayable screen on the spine (Source: Ledger)
Users can store more than 500 cryptocurrencies or NFTs on Ledger Stax. Developers are also planning to allow users to explore Web3 applications through the Ledger Live app. Users can connect the Ledger Live app on (1) laptops via secure USB-C or (2) smartphones via bluetooth. This new user interface will enable clear and intuitive interaction for all mainstream users.
Ledger Stax also has good energy efficiency and supports wireless Qi charging. Its battery can last as long as few months with a single charge.
How to Get Ledger Stax Wallet?
Ledger Stax is now available for preorder at $279 and will begin shipping by the end of March 2023. It will also be available from select retailers such as Best Buy in the U.S. Those who purchase the wallet will also receive an Infinity Pass, which provides users with a free utility NFT.
Additionally, a Ledger Stax NFT Bundle is available to mint on [Ledger] Market for 0.22 ETH to redeem a free Ledger Stax device. It also unlocks access to exclusive NFT artwork from Ledger’s network of hand-picked artists. However, Genesis Pass holders and PREMINT Collabs have special mint-priority, and there are only 10,000 bundles available.
Key Takeaway
“Not your keys, not your crypto” — there is a great risk of losing all your crypto if you park it on a centralized exchange. Hardware wallets are great self-custodial solutions because only you have control over your funds. But the problem is it can be quite daunting to operate one, especially for beginners.
Ledger Stax will revolutionize this by bringing the familiar user experience of smartphones into hardware wallets. This is a big step towards a decentralized financial future as more people are opting for self-custodial solutions. If you are interested in other hardware wallets, feel free to check these out:
Pre-order your Ledger Stax for only $279 and get it by end of March 2023!
What is the Ledger Stax wallet?
The Ledger Stax wallet is a new hardware wallet developed in partnership with Tony Fadell, co-creator of the iPod and iPhone. It has a unique and innovative design in the style of high-end Samsung cell phones, and lets users view their NFT collections even when the wallet is off.
When will the Ledger Stax be available for sale?
Ledger Stax is now available for reorder at $279 and will begin shipping by the end of March 2023.
What features does the Ledger Stax offer?
The Ledger Stax wallet is an easy-to-carry device about the size of a credit card, which allows users to store more than 500 cryptocurrencies or NFT collections. It also features an E-Ink touchscreen for viewing NFT collections, and a battery that can last for weeks or even months with a single charge.
Are there any incentives for purchasing the Ledger Stax?
Yes, those who purchase the wallet will be eligible for various prizes, such as a “Magnet Shell” protective case and an NFT from the “The Art On Ledger Stax Collection.”
Silvergate Capital, one of the leading banks for Fintech businesses and cryptocurrency, is facing a number of risks as a result of their exposure to FTX’s collapse. As a publicly traded financial service company listed on the New York Stock Exchange (NYSE), Wall Street banks including Morgan Stanley are strongly advising investors to sell Silvergate stocks due to its affiliation with FTX. Because Silvergate positions itself as the main pipeline facilitating the flow of fiat funds and fiat onramps between large crypto exchanges, its impact on the crypto market is comparable to Genesis Trading if they went under.
Silvergate Capital Exposure to FTX is $1.1 billion
Following the collapse of FTX, Silvergate Capital disclosed details of their relationship with FTX and Alameda Research. Although Silvergate does not appear to be a creditor to FTX, they had a sizeable deposit relationship with the exchange, which accounted for nearly 10% of its $11.9 billion in deposits from digital asset customers.
Silvergate claimed its exposure is “minimal” but $1.1 billion is still a lot of money. As a result, investors have begun to fear the crypto bank is developing the same symptoms as other troubled institutions who have fallen to the contagion. Short sellers have already taken their short position on Silvergate, with the stock now down 53% over the past month.
Silvergate Capital CEO Addresses Market Concerns
In response to speculations of market uncertainty, Silvergate Capital CEO Alan Lane asserted that the company followed all relevant regulatory procedures when receiving wires directed to Alameda Research, implementing risk management policies to ensure the security of customer funds. He also noted that the bank has a strong balance sheet and ample liquidity, with cash and securities in excess of its digital asset related deposit liabilities.
If we are taking Lane’s word for it, FTX’s collapse will have little effect on Silvergate. However, the broader market downturn could cause the bank’s foundation to crack if other large depositors continue struggling. Moreover, though Lane claimed they conducted “extensive due diligence” on the FTX group, the community is pointing out its contradiction as they would have prevented it in the first place if they had really done due diligence.
Morgan Stanley Downgrades Silvergate Shares
In a Monday letter to investors, Morgan Stanley lowered its rating on Silvergate’s shares from equal weight to underweight, recommending investors to reduce their exposure to Silvergate stocks. This came across when Silvergate’s digital deposits are down 60% in Q4, citing its need to fund outflows with securities sales and costly wholesale borrowing. With clients withdrawing their deposits, the company is facing even more pressure on its net interest margins (NIM) and net interest income (NII).
Despite Silvergate facing uncertainty in the near-term, the bank has been around since 1988 with a long history of robust financial performances and regulatory experience. Their tier 1 leverage ratio, which measures a bank’s ability to withstand financial stress, was 10.7% in Q3, making them among the top 15% of American banks by this critical metric.
Its long-established regulatory compliance and healthy leverage ratio are set up to weather any financial storm. However, since the crypto industry is still largely unregulated and highly volatile, as well as the downfall of several financial heavyweights, only time will tell if Silvergate will survive this crisis.
Crypto futures trading allows traders to have exposure to cryptocurrencies without the need to own the underlying crypto asset. Binance exchange offers futures trading to users through Binance Futures, which has 279 trading pairs. This article provides a guide on how to trade on Binance Futures.
Get20% off fees when signing up for Binance with the following link!
What is Binance?
Binance was launched in 2017 and is arguably the world’s most popular centralized cryptocurrency exchange. It has over 2 billion average daily volume and 72 million site visits daily. The Binance ecosystem includes Binance exchange, BNB Chain, Trust Wallet, Binance card, and other services.
What is crypto futures trading?
Crypto futures contracts create an obligation for parties to exchange the asset at a predetermined price and date. On most cryptocurrency exchanges, however, the parties can settle for the cash equivalent. But, the trade must take place.
Traders use futures trading to profit from market movements by going either “long” or “short” on a futures contract. Going “long” means that a trader purchases a futures contract expecting it would increase in value in the future. And if the value of the cryptocurrency does increase, the long trader would profit. On the other hand, a trader going “short” means they are hoping prices will drop.
Binance Futures allows users to trade crypto futures contracts on Binance. It has 279 trading pairs and has the second-highest 24-hour trading volume amongst all crypto derivative exchanges. Binance Futures offers USDⓈ-M Futures and COIN-M Futures. These are perpetual or quarterly contracts settled in USDT/BUSD, or cryptocurrency respectively.
Binance Futures also has interesting features such as a leaderboard, showing traders with the highest ROI or PNL. Other traders can follow these top traders and see what positions they are holding, as well as copy their trades.
For traders who are more competitive, Binance Futures has a battle mode where you can guess whether prices will rise or fall within the next 1 or 5 minutes. Then, you will be matched with another player who predicted in the opposite direction. Players will still gain points regardless of whether they win or lose. Points can then be used to earn further rewards.
Binance Futures trading fees
Binance uses a maker-taker fee structure. Maker trades are orders that go on the order book partially or fully e.g. limit orders. Taker trades are executed immediately before entering the order book. Market orders are a type of taker trade. The fee charged depends on which type of trade. As maker trades add volume to the order books and thus “make” the market, it is in an exchange’s interest to have more of these orders. Therefore, maker fees are usually lower than taker fees.
Binance also has a 9-tier VIP structure which offers progressively lower fees for users with high trade volume and substantial BNB holdings. Users who use BUSD, Binance’s USD stablecoin, or BNB for settling fees are also rewarded with lower trading fees.
The lowest tier, i.e. “Regular users” are traders with a past 30-day trading volume of less than 15 million BUSD or hold 0 BNB. For regular users, the maker/taker fee for USDⓈ-M futures trading is 0.02%/0.04%, and for COIN-M futures, the maker/taker fee is 0.01%/0.05%.
Highest tier users i.e. VIP 9, users must have a past 30-day trading volume of over 25 billion BUSD and hold over 5,500 BNB. VIP 9 users enjoy a maker/taker fee of 0.00%/0.017% for USDⓈ-M futures trading, and for COIN-M futures, the maker/taker fee is -0.009%/0.024%.
Extra discount! Enjoy 20% off fees when signing up for Binance with the following link!
Pros and advantages of trading on Binance Futures
Binance is one of the leading cryptocurrency exchanges. According to CoinGecko, Binance has the second-highest trading volume with over US$35 million being traded in 24 hours. Here are some of the pros and advantages of crypto trading on Binance Futures:
Many trading pairs. Binance Futures have 279 trading pairs, giving traders a wide range of options from popular cryptocurrencies such as Bitcoin ($BTC), to meme coins such as Shiba Inu ($SHIB).
Low trading fees and generous fee structure. Maker/taker fees start at 0.02%/0.04%. However, Binance Coin ($BNB) and BUSD holders, and high-volume traders are entitled to discounts, bringing trading fees to as low as 0.0100%/0.0207%.
Low minimum trade amount. Traders can start with a minimum trade amount of 0.001 BTC on the BTCUSDT Perpetual market.
Binance offers up to 100x leverage. This allows more experienced traders to potentially maximise their gains.
Binance has trading tools such as Grid Trading, TWAP, Advanced TP/SL, and Multi-Symbols Trading Page for maximum trading efficiency.
Cons and disadvantages of trading on Binance Futures
Futures trading is not available in the US. So US traders will need to use other exchanges for futures trading.
Users must pass the verification process in order to begin using Binance Futures.
Is Binance Futures trading safe?
Binance has a US$300 million Insurance Fund to protect traders. The Fund acts as a safety net to protect bankrupt traders from adverse losses whilst ensuring that winning traders are paid in full. The purpose of Binance’s insurance fund is to limit counterparty liquidations. Counterparty liquidations are where the positions of opposing traders are automatically liquidated in order to cover a bankrupt trader’s position. The insurance fund takes the remaining positions when a trader in liquidation has less than 0 USDT after all their positions are liquidated. These remaining positions would be offloaded onto the market gradually and liquidation fees will be collected from users that do not result in bankruptcy.
Binance also has a Cooling-Off Period function to help traders prevent compulsive trading behaviours. It works by preventing traders from trading futures-related products on the exchange for a predetermined period.
How to start trading on Binance Futures
Trading on Binance Futures only requires 5 simple steps.
1. Sign up for a Binance Account
To sign up AND get an additional 20% off trading fees click here.
Alternatively, on the Binance main page, click register and enter your details. Don’t forget to fill in GQWT3T1T for the Referral ID in order to be eligible for 20% off trading fees.
You can sign up with your phone, email, Google, or Apple accounts.
2. Open a Binance Futures account
Go to Binance Futures and click Open Now, if prompted, you can enter GQWT3T1T as the Futures referral code in order to enjoy 20% off trades. Then, complete and get all the answers correct on the 14-question quiz on how to use Binance Futures.
3. Complete the verification process
Click Profile and then Verification. Follow the steps and fill in your personal information. A government-issued ID (e.g. a passport) and address proof must be provided, and you must also pass the facial recognition test.
4. Make a deposit into your Binance account
Binance allows you to deposit fiat or cryptocurrencies into your account. To deposit, click on your profile and go to Dashboard. Under Fund your Account, you can choose to Buy crypto using Mastercard, Visa, Google, or Apple Pay. Users can also choose to Deposit crypto from other exchanges or their hardware wallet.
5. Start trading
On Binance Futures, choose between USDⓈ-M and COIN-M Futures Contracts. On the top left-hand corner (marked in yellow), you can choose which futures contract to trade.
Choose which futures contract to trade (Source: Binance)
On the left-hand side, there are various tools to help you identify patterns or trades such as trend lines, arrows, or Fibonacci retracement. You can use these tools to annotate your charts.
On the top right-hand side of the page, you can select the Margin Mode. Users can choose between Cross or Isolated margin modes. Cross-margin mode means that the entire margin balance will be shared across open positions. However, if there is a liquidation event, the risk is that their entire margin balance and any open positions may be lost. Isolated margin mode, on the other hand, allows traders to manage their risk on individual positions by restricting the amount of margin allocation. The benefit of isolated margin mode is that if a position is close to being liquidated, users can allocate additional margin to that position.
Set your Leverage (if any) by clicking on the top right-hand corner. Traders can set the leverage from 1x to 125x. However, traders should be careful that setting high leverage could result in significant losses in the event of a liquidation.
On the right-hand side of the page, you can also select the type of order (e.g. Limit, Market, Stop Limit, etc), the order price, and size. For a more automated yet managed trading experience, traders can also select TP/SL i.e. when to take profits, or stop loss. Finally, traders need to select between a Buy/Long, or Sell/Short order.
Is Binance Futures safe?
Binance Futures comes with security features expected from every reputable cryptocurrency exchange. Binance Futures requires users to have passed the KYC verification before they can start trading. Before trades are executed, users must also have enabled 2FA authentication and will be sent an Anti-Phishing Code for verification.
Binance Futures also has a nearly US$300 million insurance fund to protect bankrupt traders from adverse losses. It also ensures that profits of winning traders are fully paid out.
Finally, if users really need help, Binance offers customer support in 17 different languages via Live Chat or email.
Conclusion
Trading futures contracts are a great way for cryptocurrency traders to profit from fluctuations in cryptocurrency prices. Furthermore, Binance Futures is a popular exchange for traders of any level to trade futures since they have a large number of trading pairs. Binance Futures also has the benefit of a huge insurance fund, helpful tutorials, and customer support to ensure that customers have a straightforward and secure trading experience.
Enjoy 20% off fees when signing up for Binance with the following link!
“Not your keys, not your crypto” — this decade-old mantra has taken full effect after the FTX collapse. Crypto users have lost faith in centralized exchanges (CEXs) and are migrating to decentralized exchanges (DEXs) instead. Though a non-custodial option seem to be an ideal solution, it would likely take a long time until price discovery shifts from centralized to decentralized platforms. Let’s take a closer look.
Impact of FTX Collapse on Centralized Exchanges
Almost every centralized platform in the crypto industry had done business with FTX, and some companies bore the brunt of the collapse such as BlockFi, Genesis Trading, and KuCoin. Crypto users around the globe found they could no longer withdraw assets from several crypto exchanges as the contagion spreads.
FTX’s collapse is a symptom of a problem inherent to centralized exchanges, also known as custodial exchanges. Customers’ tokens parked on the platform are exposed to the risk the exchange could go bust. Because crypto has no government depositary schemes to cover losses, customers of insolvent exchanges must wait for bankruptcy courts to regain what remains of their funds — if there is any left after other investors claim their share.
Given the circumstances, all crypto exchanges including Binance have been implementing proof-of-reserves to verify they have enough assets to cover all customers’ funds. Though it is a good transparency initiative, investors still fear for the safety of their funds. As a result, many CEX customers rushed to withdraw their funds, opting for non-custodial solutions. This is where DEXs come in.
Rise of Decentralized Exchanges after FTX Collapse
Soon after FTX’s downfall, decentralized exchanges saw a vertical spike in trading volume. According to DeFi Llama, the monthly DEX volume showed an increase of 80% from $57.6 billion in October to $103.8 in November. At the time of writing, Uniswap had the largest trading volume with 60%, followed by Curve (9.6%), PancakeSwap (9%), DODO Exchange (8%), and Balancer (3%).
Moreover, Uniswap also surpassed Coinbase in daily ETH trading volume on November 14 ($1.1 billion vs $600 million). This is significant as CEXs have always been dominant in trading large market cap coins given their deep liquidity. It strongly indicates traders are moving away from CEXs.
This is compounded by the fact that Bitcoin (BTC) has been exiting CEX wallets at a record pace. According to on-chain data analytics Glassnode, BTC withdrawals from CEX to self-custody wallets is unfolding at a historic rate of 106k BTC monthly. This accounts for $3.7 billion worth of Bitcoins over the past week. Simultaneously, hardware wallet providers such as Ledger and Trezor reported its highest sales day. Check out some of these wallets:
Decentralized exchanges, also known as non-custodial exchanges, are decentralized finance (DeFi) protocols that allow users to trade directly with other users via smart contracts, without handing over management of their funds to an intermediary or custodian.
They are non-custodial, which means users have full and exclusive control of their wallet’s private keys. This is the opposite of putting your assets on CEXs as they hold onto the wallets and keys on your behalf. This feature makes it impossible for centralized players to siphon user funds, and is why people are doing their trading on DEXs instead.
Transactions on DEXs are facilitated through the use of smart contracts, and liquidity pools are funded by other users. As such, there is significantly reduced counterparty risk — you do not need to trust other users, only the code. There are three types of DEXs that uses different protocols: automated market makers (AMM), order book DEXs, and DEX aggregators. But they are all programmed to determine the best price for an asset, all while offering a better rate for users compared to CEXs.
Moreover, anyone can earn passive income if they provide liquidity to the protocol. On the other hand, CEXs are managed by a centralized organization such as a bank or a small handful of professional trading firms or market makers. In this case, since liquidity is concentrated in these actors, CEX maker and taker fees are much higher than DEX swap fees. Additionally, they can also choose to withdraw their assets during periods of volatility, restricting trades when users need it most.
Challenges Facing Decentralized Exchanges
Despite the many critical advantages DEXs offer, it has several downsides that hinders widespread adoption:
Relies Heavily on Centralized Exchanges
Most DEXs are dependent on price oracles (i.e. Chainlink) that source data from CEXs. As such, an attacker can manipulate the price of an asset on a particular DEX, leading to inaccurate price data being fed to all protocols which rely on that DEX as a price oracle.
A flash loan attack is a common method to trick price oracles. In such events, attackers essentially create false arbitrage opportunities by instantaneously borrowing, swapping, depositing large numbers of tokens, tricking price oracles that the target token’s price is being moved on a single exchange.
This creates a disparity which can then be arbitraged, allowing the sale or purchase of assets at above or below market price. Polygon’s Quickswap was a victim of this attack in October 2022.
DEX Transactions are Slower than CEX
Trading on DEXs are often much slower because all trades take place on the blockchain. It takes time for blocks to be validated and transactions to go through. On the other hand, CEX trades are almost instantaneous because they take place on proprietary matching engines instead of the blockchain. These engines are complex software that synchronizes and combines data from thousands of trading pairs at the same time.
Liquidity Issues and Impermanent Loss
DEXs cannot yet compete with large CEXs in size as they cannot offer as much liquidity. When they do not have enough liquidity, large orders can incur slippages in which the buyer pays above-market prices on their order. As such, a lack of liquidity can deter institutional participation as large orders are likely to suffer from slippage.
On another note, liquidity providers are exposed to a risk of impermanent loss when depositing two assets for a specific trading pair. In most cases, liquidity providers end up withdrawing more of the token that lost value and less of the one that gained value because the ratio of tokens held in the pool changes as trades occur.
Smart Contract Vulnerabilities
Although there is significantly reduced counterparty risk when using DEXs, there is still the issue of smart contract vulnerabilities that can be exploited by hackers. Smart contract codes are publicly available and anyone can review their code. Therefore, exploitable bugs can still slip past audits and other code reviews.
In the wake of FTX’s collapse, users’ confidence in centralized exchanges are waning and the crypto community expects a shift toward decentralized platforms. However, according to JPMorgan and several other financial analysts, centralized exchanges will continue to control the majority of global digital-asset trading volumes. Although DEX trading volume has surged over the past month, it is a possibility that it reflects the automatic liquidations following the FTX collapse, and does not indicate the start of a long-term trend.
DEX users are still confined to a relatively small base of niche traders and investors, and their interfaces can be difficult to navigate. At this stage, CEXs still provide a better user experience, fiat gateways, and deeper liquidity. To date, Uniswap has a total of 4.5 million users cumulatively, whereas Coinbase has a total verified user base of 108 million.
With that being said, DeFi is still in its infancy. Development in liquidity protocols, safekeeping mechanisms, and user interfaces is needed to fully realize the potential of non-custodial trading services. As long as DEXs can compete with CEXs in terms of liquidity and speed, we may start to see widespread adoption or even a full-on switch to DEXs. After all, decentralized infrastructures are key to preventing centralized collapses, something we, as the community, has had enough of for the past year.
FTX Japan is hoping to restart withdrawals for its customers in Japan, who were affected when the exchange had to suspend services on November 8th. This plan was approved by FTX Trading Ltd., the global enterprise of Sam Bankman-Fried, which filed for Chapter 11 bankruptcy three days later. FTX Japan has started development work to allow customers to withdraw their funds, incorporating controls and security audits for a robust and secure process. The company plans to publish information about customer assets held in segregated wallets and in trust accounts each Monday and hopes to announce the resumption of withdrawals soon.
Quick Summary:
FTX Japan is looking to restart withdrawals after a plan to return deposits was approved by its bankrupt parent FTX
Withdrawals from FTX Japan were halted on Nov. 8 after local financial regulators ordered the exchange to suspend services
FTX Japan had been working on the plan to restart withdrawals for the last two weeks and says it was approved by the FTX Trading management team
FTX Japan is set to publish information about customer assets held in segregated wallets and in a trust account each Monday
FTX Japan aims to publish additional information regarding the resumption of withdrawals for FTX Japan users in short order
FTX Japan is looking to restart withdrawals after the approval of a plan to return deposits from its bankrupt parent FTX. The exchange was forced to suspend services on November 8th after local financial regulators ordered it to do so. FTX Trading Ltd., the global enterprise of Sam Bankman-Fried, then filed for chapter 11 bankruptcy in the U.S. three days later.
FTX Japan has been working on the plan to restart withdrawals for the last two weeks and it has now been approved by the FTX Trading management team. The subsidiary is set to publish information about customer assets held in segregated wallets and in a trust account each Monday. Additionally, they will be incorporating controls, security audit, reconciliations, and reviews to put in place a robust and secure process.
FTX Japan has stated that they aim to publish additional information regarding the resumption of withdrawals for FTX Japan users in short order. This is great news for customers of the exchange who may soon be able to get their money back. It is also a positive sign for the crypto industry as a whole, as it shows that exchanges are taking steps to ensure the security of customer funds and that the industry is becoming more regulated.
FAQ
1. When will FTX Japan restart withdrawals? 2. How will customer assets be held in segregated wallets? 3. Who approved the plan to restart withdrawals? 4. When will information about customer assets held in segregated wallets be published? 5. Will customers be some of the first to get their money back?
In a shocking turn of events, the Ankr aBNBc contract was recently attacked, resulting in the creation of an additional 10 trillion aBNBc tokens. This is particularly concerning because BNB Chain had recently launched the liquid staking feature, which allowed users to earn interest by staking their BNB tokens to the liquid staking agreement and receiving aBNBc tokens in return. The attack happened in the following transaction: https://bscscan.com/address/0xf3a465c9fa6663ff50794c698f600faa4b05c777
Quick Summary:
Ankr aBNBc contract was attacked, resulting in the creation of 10 trillion additional aBNBc tokens.
Ankr announced they would purchase 5 million BNB worth of tokens to compensate the liquidity providers.
Tornado Cash is being used to launder the stolen funds
Ankr had previously received an Audit from Peckshield warning about a “trust issue of Admin Keys”, which had the potential to be used for privileged minting of aBNB tokens.
Companies must take security warnings seriously and address any potential vulnerabilities as soon as possible to avoid catastrophic financial losses and reputational damage.
What is the Ankr Platform
Ankr is a blockchain-based cross-chain infrastructure with a DeFi platform that enables staking and dApp development, and was designed and developed with the goal of creating a decentralized, private, and secure internet. Through the Stkr protocol, users are able to stake Ethereum (ETH) in return for aETH, which represents the future gains on their deposited staking balance. With their mainnet launched in 2019, users can deploy development nodes and build dApps on the network, or deploy staking nodes and become stakers on the ANKR Web3 platform.
What happened with the exploit
The Ankr Exploiter was able to transfer 900 BNB into Tornado Cash, which caused the price of aBNBc to drop by 99.5%. In response to this security breach, Ankr announced that they would purchase 5 million BNB worth of tokens and use them to compensate the liquidity providers. Additionally, they plan to take a snapshot and reissue ankrBNB to all valid aBNBc holders before the exploit.
The team at Ankr has assessed the damage and it is max 5M USD worth of BNB from the liquidity pools.
We are currently working hard to resolve this issue efficiently and we would like to propose the following to address the current situation:
Tornado Cash is an Ethereum-based noncustodial privacy platform that provides users with the ability to deposit and withdraw ERC-20 tokens and ETH without revealing the source of the funds. A secret hash is generated by the protocol whenever a user deposits funds into the liquidity pools and this hash is used to prove ownership when they wish to withdraw. This ensures that the source of the funds is untraceable, providing total asset privacy. In 2020, ownership of Tornado Cash was transferred to its community, making it a fully decentralized protocol. As such, no one individual or entity has control over it, thereby ensuring that users can use the protocol in complete confidence that their privacy is secure.
3/ Additionally, Ankr will purchase 5m worth of BNB and use this to compensate in totality the liquidity providers that have been affected by the exploit due to the drainage of the liquidity pool.
Damage will be minimal as Ankr is willing to compensate for damages
This incident serves as a reminder that having an audit does not guarantee security. Ankr had previously received an Audit from Peckshield warning about the ‘trust issue of Admin Keys’, which had the potential to be used for privileged minting of aBNB tokens. Despite this warning, the team “Confirmed” the warning but failed to address the underlying issue.
As this incident demonstrates, it is essential that companies take security warnings seriously and address any potential vulnerabilities as soon as possible. Without proper security measures in place, companies risk potentially catastrophic financial losses and reputational damage. It is therefore important that companies regularly review their security protocols and remain vigilant against possible threats.
Crypto futures trading is a type of derivative financial contract. It creates an obligation for the parties to exchange the crypto asset at a predetermined price and date. In this article, we look at what is crypto futures trading.
What is futures trading?
Futures are generally named based on the month they expire. For example, a March crude oil futures contract will expire in March and is based on crude oil as an underlying asset. You can also find contracts for other commodities.
Traders use the term futures broadly for a whole asset class. And there are multiple futures contracts available based on different types of assets. For example:
Commodities such as crude oil, corn, and wheat;
US bonds, or any other government-backed financial bond;
Precious commodities like silver and gold; and
Index futures such as the Dow Jones Industrial Index.
For example, a BTCUSD quarterly contract uses BTC as an underlying asset and expires quarterly.
What is crypto futures trading?
In crypto futures trading, traders can gain exposure to cryptocurrencies without actually needing to possess the underlying crypto asset. However, there are risks involved with futures trading such as high price volatility.
Traders use futures trading to take advantage and profit from market movements by going either long or short on a futures contract. Going “long” means that a trader purchases a futures contract expecting that it would increase in value in the future. On the other hand, a trader going “short” means they are hoping prices will drop.
Here is an example of a futures contract:
Adam enters into a long futures position when BTC was trading at US$15,000 whilst Bob enters into a short futures position. BTC prices rose to US$20,000 and both Adam and Bob agree to settle their positions. For Adam, BTC was worth more at settlement than when he entered the long position. So Adam makes a profit of US$5,000 from the exchange, being the price difference between the two times. On the other hand, Bob is holding a losing trade since he was holding a short position. So Bob must instead pay the exchange the deficit loss of US$5,000.
Difference between options and futures contracts trading
Futures and options contracts are not the same. An options contract does not impose an obligation on the buyer or the seller. Rather, an options contract gives the parties the option to buy or sell a crypto asset at a fixed price on a specified expiry date. There are 2 types of options contracts: call contracts which give traders the right to buy, and put options which give traders the right to sell.
On the other hand, in a futures contract, the buyer has to take possession of the underlying asset, and the seller has to sell that asset. The parties can settle for the cash equivalent, which is what happens on most cryptocurrency exchanges. However, the trade must take place.
Pros of crypto futures trading
Here are some benefits (pros) of crypto futures trading:
Crypto futures contracts allow traders to gain exposure to cryptocurrencies and possibly profit from their price movements without holding the cryptocurrency itself.
Traders can bet against the direction of the market and profit from it. Long traders predict the price of a crypto asset will increase. Whist traders which go short would profit if prices drop.
Trading crypto futures with leverage allows traders to potentially have more gains with only a fraction of the total cost. This, however, comes with risks.
Cons of crypto futures trading
Here are some risks (cons) of crypto futures trading:
Cryptocurrency markets can be very volatile. And unlike traditional markets, cryptocurrencies are traded 24 hours a day. This means traders must constantly check the direction of the market.
Leveraged trading is very risky and could lead to substantial losses.
Conclusion
Crypto futures trading is a good way to gain exposure to cryptocurrency trading without holding the underlying cryptocurrency. It is also a hugely popular financial product that is offered on most crypto exchanges. Traders however should take extra care and ensure they have appropriate trading risk mitigation strategies in place to manage their portfolios. You would never invest more than you can afford to lose, especially when cryptocurrency markets are by nature extremely volatile.
Funding rates are periodic payments by cryptocurrency exchanges to traders based on the difference between the perpetual contract market and spot prices. Depending on your standpoint, you could either stand to receive payment or be the party paying it. Many cryptocurrency traders take advantage of crypto funding rates to earn passive income. In this guide, we look at how crypto funding rates work and how you can earn passive income from them.
What are traditional futures vs perpetual futures contracts in crypto trading?
To understand what is a funding rate, we must first know the difference between Traditional Futures and Perpetual Futurescontracts.
A key feature of traditional futures contracts is the expiration date. Traditional Futures contracts usually settle (expire) once a month or quarter. And when this happens, the settlement procedure begins. During this settlement period, the contract price converges with the spot price and then all open positions will expire.
Crypto-derivative exchanges like Binance often provide Perpetual Futures contracts, which have a similar structure to Traditional Futures contracts. Perpetual contracts, on the other hand, have a significant advantage. The advantage of perpetual contracts is that they do not have an expiry date. So traders can, for example, keep a short position open indefinitely unless they are liquidated.
Furthermore, Traditional Futures usually have a broker who will ask the trader to top up the amount accordingly based on “margin calls” i.e. the margin difference between the contract price and the spot price.
Due to the fact that perpetual futures contracts never settle or expire, cryptocurrency exchanges require a system to ensure that futures and index prices converge on a regular basis. This is where the concept of the funding rate comes in.
What is a Funding Rate?
Funding rates are periodic payments to long traders, which predict the market will go up, and short traders, which foresee the market will go down. The funding rate amount is based on the difference between the perpetual contract market and spot prices. So, depending on the traders’ position, they can either stand to pay or receive the funding rate.
When the funding rate is positive, the price of the perpetual contract is greater than the mark price. In such cases, long traders pay short traders. Conversely, the funding rate is negative when perpetual prices are below the mark price. This is when the short traders pay the long traders.
Why do Funding Rates Exist?
Futures contracts expire (settle) at a future date. When this happens, the futures price will meet with the current spot price. That is, the futures price is a predetermined spot price at a predetermined date in the future.
The futures market can be in one of two states relative to the spot price:
Contango: The futures market is trading above the spot price; or
Backwardation: The futures market is trading below the spot price.
The difference between the futures and spot market is called the “basis”.
Whilst perpetual contracts do not expire, they still need to settle at a spot price. However, there are sometimes differences in the cryptocurrency’s prices between the spot and futures prices on an exchange. This is despite the fact that they should be in line since they need to settle against each other over time.
Therefore, to keep the spot price and the perpetual contract prices in line, exchanges add an interest rate component (i.e. a funding rate). This funding rate incentivizes traders to take positions that help close the price gap, whilst penalizing those that do the opposite. In essence:
When the funding rate is positive, those who are long pay those who are short. This means those who are short will benefit. Therefore, people are incentivized to take short positions; and
When the funding rate is negative, those who are short pay those who are long. So if you are in a long position, you will receive the funding paid by those who are short.
Traders try to avoid paying the “penalty” by closing their long or short positions before the funding rate expires. When traders do this, the prices between the contracts and spot prices will begin to converge.
For example, when the contracts price is above the spot price, the funding rate is positive. In such cases, those who are long pay those who are short. Traders with long positions are encouraged to close their positions before the funding rate expires to avoid paying those with short positions. Meanwhile, traders are incentivized to open short positions because they can receive payment. The effect of this is that the contracts price will be pushed down and the gap between that and the spot price will be closed.
On the other hand, when the contract price is below the spot price, the funding rate is negative. Shorts will pay the longs. Therefore, traders with short positions will try and close their positions to avoid payment and open long positions to receive payment. Thus, the contract price will be increased to meet the spot price.
What is the Purpose of Funding Rates?
The purpose of funding rates is to prevent continued divergence in the perpetual contract market and the spot price for a cryptocurrency. And since prices of cryptocurrencies are consistently fluctuating, the funding rate has to be recalculated periodically. For example, some exchanges like Binance will recalculate their funding rates every 8 hours.
How to Make Money and Earn Passive Income from Funding Rates
One tip to make some “passive income” from funding rates is to buy AND short the exact same amount of the cryptocurrency you put your money on.
This method balances the positive and negative funding rates, where technically you do not have a position in that particular cryptocurrency market since it is counterbalanced.
However, your short trading will get paid on an hourly basis. So, you can get “passive income” on the side, even though overall it mostly turns out to be net value since you have the positive trades too.
A lot of large trading firms use this defunding method to get large sums of money quickly.
Conclusion
Crypto funding rates are an integral feature of the perpetual futures market Most cryptocurrency exchanges use funding rates to ensure that contract prices are always in line with spot prices. In turn, traders can benefit from taking advantage of funding rates to earn some passive income with funding fees.
To learn more about how to profit from funding rates on different exchanges, check out these articles:
BlockFi is a company that specialises in providing cryptocurrency lending services to clients worldwide. In our previous article, we reported that since 11th November 2022, BlockFi has paused its client withdrawals. Their reason for this was because of the “lack of clarity” in the status of FTX.com, FTX US and Alameda. Now the question is, what will happen to BlockFi? Will they also go bankrupt like FTX?
What is BlockFi?
BlockFi was founded in 2017 by Zac Prince and Flori Marquez. The aim of BlockFi was to create credit services for those with limited access to simple financial products. Their financial products included borrowing using crypto as collateral, the ability to earn crypto interest rates, and trading, among others.
BlockFi prides itself as the only independent lender and is backed by notable investors such as Valar Ventures, Fidelity, Akuna Capital, and Coinbase Ventures to name a few.
What is happening to BlockFi?
Since 11th November 2022, BlockFi has paused its client withdrawals due to “lack of clarity” in the status of FTX.com, FTX US, and Alameda. Wire withdrawals and loan processing have also been delayed since 10th November 2022 but are expected to resume on 14th November 2022. When BlockFi users access the website, there is a banner warning them that client withdrawals have been paused. BlockFi also reminds users not to make deposits to the BlockFi Wallet or Interest Accounts for the time being.
BlockFi suspends withdrawals
What is happening to BlockFi cards?
BlockFi’s BlockFi Rewards Visa Signature Card was one of the first cryptocurrency rewards credit cards in the market. The BlockFi card’s major benefits include 1.5% crypto rewards on every single purchase, which can go up to 10% for spending with BlockFi’s partners.
However, there have been people reporting that purchasing privileges on the BlockFi card have been suspended “until further notice”. This means that cardholders can no longer make purchases using the BlockFi card.
This development stems from the fact that payments company Curve is in active negotiations with BlockFi to acquire their over 87,000 credit card customers. According to reports, if the negotiation is successful, Curve will take over the BlockFi card program, and aim for customers to still be able to earn crypto rewards as they did before.
Is BlockFi in trouble?
In June 2022, FTX US had extended a US$400 million line of credit to BlockFi with an option for FTX us to acquire BlockFi for a variable price of up to US$240 million. However, the collapse and bankruptcy of FTX have put the future of BlockFi in question for some. This is compounded by the fact that California’s Department of Financial Protection and Innovation (DFPI) said on 11th November 2022 that they were suspending BlockFi’s lending license for 30 days. During this suspension, the DFPI will be conducting investigations into BlockFi.
BlockFi has also admitted in its latest update that it had “significant exposure” to FTX and their associated companies. However, they deny they had a majority of funds held at FTX. To learn more, check out our article- Were BlockFi’s assets held on FTX?
BlockFi files for bankruptcy
On 28th November 2022, BlockFi announced it had filed for Chapter 11 bankruptcy in the United States. This latest development comes after speculation has already been brewing in the past few weeks that it was affected by the collapse of FTX exchange. The bankruptcy will include Blockfi and 8 of its subsidiaries.
According to Court documents, BlockFi has over 100,000 creditors. The company has both assets and liabilities in the range of US$1-10 billion and US$256.9 million cash on hand.
Therefore, the future of BlockFi is still uncertain, and there is fear that it may go bankrupt like the FTX Group. However, there is currently no official announcement or news that BlockFi will be filing for bankruptcy.
How much does FTX owe BlockFi and vice versa?
During BlockFi’s bankruptcy hearing, the company revealed it has US$355 million stuck on FTX. Further, Alameda Research, an associated company of FTX, has defaulted on its US$680 million loan from BlockFi.
On 28th November 2022, BlockFi had also sued Emergent Fidelity Technologies, a company owned by FTX’s Sam Bankman-Fried. The purpose of the lawsuit was to seek SBF’s shares in Robinhood that were used as collateral as part of a pledge agreement.
On the other hand, on 1st July 2022, FTX US extended a US$400 million line of credit to BlockFi. Of this, BlockFi still owes FTX US US$275 million as allegedly agreed to by 89% of its shareholders. The purpose of the loan was to help BlockFi after it was affected by the collapse of Terra’s stablecoin in May this year. The loan was originally set to mature on 30th June 2027 and had an interest rate of 5% per annum.
What will happen to BlockFi?
On 28th November 2022, BlockFi had its first bankruptcy hearing. During this hearing, BlockFi expressed that it will intend to seek the Court’s approval to restore withdrawals for BlockFi wallet holders. However, no formal application has been made yet and the Court has not made a decision on whether withdrawals will be reopened to customers.
BlockFi’s next bankruptcy hearing is presently scheduled for 9th January 2023 at 10:00 EST.
