The $2 billion of Bitcoin funds moved by Binance was a part of a proof-of-reserve audit conducted by the crypto exchange.
FUD Spikes With BTC Outflow
A significant outflow of crypto funds from the Binance exchange was reported on Twitter on Monday. The account called Whale Alerts reported that 127,351 BTCs were pulled out of the exchange in a single transaction and deposited in an anonymous wallet address. The value of the funds moved amounts to just over $2 billion.
Understandably, this triggered community-wide fear and panic as everybody jumped to the conclusion that Binance was either hacked or was on the verge of shutting down. As a result, the market catapulted, with a sharp drop of 5% of the BNB token.
CZ Explains Funds Transfer
However, Binance CEO Changpeng Zhao (CZ) tweeted out a clarification that the funds moved were part of Binance’s proof-of-reserve audit. He claimed that the auditor needed to receive a certain amount of BTC to demonstrate how the Binance wallets were controlled.
“This is part of the Proof-of-Reserve Audit. The auditor require us to send a specific amount to ourselves to show we control the wallet. And the rest goes to a Change Address, which is a new address. In this case, the Input tx is big, and so is the Change. Ignore FUD!”
FUD refers to Fear, Uncertainty, and Doubt, a phenomenon that has increased, especially in the 2022 crypto market, due to the many hits taken by the industry. CZ’s comments cleared up the confusion faced by the community and put a pause on the steeply dropping value of the Binance Coin.
CZ Under Fire?
However, CZ’s explanation of a PoR audit shines a spotlight on another rather contrasting comment he made on the subject just a few weeks ago. On November 13, he tweeted,
“If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away.”
He has claimed that the audit required funds to be transferred to demonstrate that it did not affect the operability of the exchange and has appealed to the masses to not buy into the FUD. However, his previous tweet contradicts his statement. Naturally, even VC-level investors are not convinced by the explanation and are seeking further details. One such example is VC investor and billion-dollar equities fund manager, Mira Christanto, who claimed that the methodology used by most auditors does not include making any kind of transaction on the network. CZ has also been criticized by former Kraken CEO Jesse Powell, who said that the exchange had failed to implement proper external audits and include liabilities in its Proof-of-Reserve reports.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Amara is a graduate in Business Management, and has been following the world of crypto since 2019. Having a keen eye for detail, Amara enjoys finding breaking stories via Twitter, official press releases and website blog posts. Outside of crypto, Amara enjoys rock climbing, dancing and spending time with her siblings.