In the world of cryptocurrencies, exchanges such as Binance play a crucial role in facilitating buyers, sellers, and traders to conduct their transactions. As the largest cryptocurrency exchange worldwide, Binance has not been free from scrutiny, recently facing lawsuits filed by the U.S. Securities and Exchange Commission (SEC). Amidst this attention, it is essential to consider the accuracy of the information presented and the impact of market fluctuations on Asset Under Management (AUM).
Binance CEO Changpeng “CZ” Zhao addressed the reported outflows on Twitter, calling the data slightly misleading. He explained that Binance’s internal data showed a net outflow of approximately $392 million within the last 24 hours, contrasting with some third-party analysis firms’ calculations. These firms often measure changes in AUM in USD equivalent, including the impact of crypto price drops. This approach, according to CZ, may not accurately represent actual outflows, as it combines two distinct concepts.
CZ further emphasized that while crypto price drops do reduce AUM, they should not be classified as outflows. He pointed out that the public wallet addresses of Binance allow tracking funds movement, but some analysis firms solely measure outflows without considering inflows, leading to a skewed representation of Binance’s asset movements.
Market fluctuations also have a considerable impact on AUM and can create an illusion of greater outflows. For example, on June 10, the crypto market experienced a significant price drop, and arbitrage traders transferred substantial funds between exchanges. Such increased movement of funds resulted in heightened activity, affecting the calculations of AUM and outflows.
CZ cited a previous example from November when Binance processed a net outflow of $7 billion in a single day, emphasizing that these figures need to be considered in the context of overall market dynamics and the specific circumstances surrounding each trading day.
Understanding AUM and different factors affecting it is vital for all crypto enthusiasts, as this information can impact decision-making and investment strategies. Undeniably, it is crucial for market participants to do thorough research before investing in cryptocurrencies. While maintaining a healthy level of skepticism, being aware of the limitations in measuring outflows and AUM can make for a more informed and less misguided experience for individuals navigating the crypto world.
Source: Coingape
