BNB valuation curious as trouble mounts for Binance

The native token of the Binance ecosystem, BNB, is trading at a one-year low. 

The token is down 30% over the last month as it careens from one crisis to the next. It has come under further pressure this week amid a report published in the Wall Street Journal over claims it is violating Russian sanctions. This follows a probe by the Department of Justice commenced in May. 

Not helping matters was a separate issue regarding an erroneous tweet from Binance saying euro deposits and withdrawals had been suspended. Binance’s European banking partner, PaySafe, clarified that transactions would in fact be available until September 25th, after which support for Biannce will be withdrawn following a “strategic review”. 

We published an analysis into BNB last month where we focused on the myriad red flags with the token, and the wider exchange, too. 

We won’t rehash all the details here, but the bottom line is that this is a token for which buyside liquidity is low, and whose connected exchange is a black box of mystery. As we have said many times before, there is no proof whatsoever that Binance is engaged in anything sinister, but therein also lies the problem – there is no proof to the contrary, either. 

This is because of the total lack of financial disclosures and/or audits. Nothing is more evident of this than CEO Changpeng Zhao’s remarkable tweet below. Following the FTX collapse in November, scrutiny fell on Binance to be more transparent. The exchange responded by publishing a “proof of reserves” report, although made no mention of liabilities. Zhao’s solution? To “ask around”.  

yes, but liabilities are harder. We don't owe any loans to anyone. You can ask around.

— CZ 🔶 BNB (@cz_binance) December 7, 2022

The irony of this was not lost on many – a crypto community forced to rely on the tweets of a CEO regarding an opaque exchange, only a few weeks after a certain Sam Bankman-Fried tweeted “FTX assets are fine” regarding his own exchange.

Again, there is no proof that anything ugly is happening at Binance, and the FTX comparison needs not to be made, but the similarity regarding transparency (or the lack thereof) is notable. In the most simple terms possible: this is a company for which a financial assessment is impossible to make because the information simply is simply not there. 

Mounting legal issues

Of course, there is mounting reason to be suspicious, the latest news regarding the DoJ and Russian sanctions is a case in point. There is another DoJ investigation already ongoing, while there is an SEC lawsuit levelling accusations ranging from manipulating volume and trading against customers to violating KYC, AML and securities regulations. 

Getting back to BNB specifically, the token has actually performed extremely well compared to most altcoins. Until the lawsuit in June, it was outperforming Bitcoin during the bear market (taken from the start of 2022), despite the fact most altcoins saw losses far greater than the world’s biggest cryptocurrency – as tends to happen in market pullbacks. 

This begs the question: why? And it also circles back to the above point regarding buyside liquidity. Who is buying this token? 

Take a look at what has happened to Binance in the last year:

• SEC lawsuit with multiple charges
• CFTC lawsuit
• Multiple DoJ investigations
• Collapse in market-wide trading volume
• Shutdown of BUSD stablecoin (albeit issued by Paxos but Binance-branded)
• Wider crypto meltdown

And after all these events, BNB is trading more or less flat over the same timeframe? 

The tokenomics, thin liquidity, endless legal issues and overall uncertain outlook render BNB an incredibly difficult investment to make an argument for. Its current valuation is still dizzying, with a market cap of $33 billion placing it behind only Bitcoin, Ethereum and Tether. 

As we keep saying, there is nothing to prove any suspicions around BNB or Binance. All could be perfectly above board. But there are a hell of a lot of problems surfacing, and the biggest problem of all is that there is nothing to prove them wrong, either.

This is an exchange that is “headquarterless”, auditless and in control of the fourth biggest cryptocurrency on the market. Be careful, that is all – we would say do your own due diligence, but that is not possible in this case.