Despite a horror year, Binance remains the undisputed champ of the crypto space. But how long can they defy gravity?

Looking back, it’s still hard to believe exactly how fast Binance’s rise to the top actually was. The exchange traded its first Bitcoin in June 2017 and by the end of the year it was basically the market leader in every metric that counted. By most accounts it was the fastest that any company has ever cracked a billion dollar valuation.

There were plenty of reasons for this – they were app first, had a vastly superior UX and realised that when it came to shitcoins, more was definitely more – but from that point onwards the crypto narrative was essentially the Binance narrative. They didn’t always create the story, but they invariably took what was happening, drowned it in liquid napalm and then set the story on fire.

Derivatives, DeFi, ICOs, stablecoins: Binance was the lightning that supercharged all of them. It was where the smart money fed on the dumb and the dumb kept opening 100x positions on low liquidity dump magnets. Even the collapse of FTX – an event partly kickstarted by CZ himself – only further entrenched their almost monopolistic power.

But now the sharks are well and truly circling. Regulation, prosecution and resignation are the crypto harbingers of doom and Binance is being hit with all three on an almost daily basis. Does it just not realise that it’s already dead?

It’s just a flesh wound

I don’t have the space or energy to list all the Bad Things that have happened to Binance in the last 12 months. Suffice it to say that if this was a regular company, it probably would have already collapsed and sold the film rights. (And yes, I know that’s happening to FTX.)

From suspicious withdrawals to high-profile SEC lawsuits, from losing senior members of your legal and executive team to losing your US$23 billion stablecoin, from restraining orders to dodgy financial records to sanctions violations to incriminating texts to liquidity crunches to plummeting profits to being pulled from country after country, this truly is the kind of year that makes you go “stop, stop, he’s already dead”.

But Binance is far from dead. Its overall market share remains basically where it was when FTX went down. Despite it all, CZ continues on his merry way, a little chastened perhaps, and worth a shade/95% less than he was a couple of years ago, but showing no sign of backing down or executing a strategic volte-face. How is it even possible?

Try to hit me

As I see it, there are two things working in Binance’s favour. First is the moribund state of the crypto market. So little is happening right now that stasis becomes the only possible outcome. Transition (well, unforced transition) needs positive energy and hype and those are two things in cripplingly short supply at the moment.

Second is Binance’s extreme opaqueness. At times based in China, Singapore and Malta, Binance presently has no headquarters and will not disclose where their website is hosted. No-one knows anything about their finances – their incomings, outgoings, assets. Even Tether, that much bemoaned epitome of crypto opacity, makes the right noises about being periodically audited.

But Binance DGAF. It should make people run screaming, but like a politician going small-target, the result has been that it’s just really hard to make the shit stick. They even have a handy scapegoat – Binance.US – which they’re using to absorb the body blows of the US government, knowing that it can be shut down at a moment’s notice with no real adverse effects on the business at large.

Follow the leader

The irony of crypto has been that for a technology built on decentralisation and individual emancipation, the high-speed network effects that it enables have often led to a landscape of extreme conglomeration. The more that people started using Binance, the more appealing a destination it became until the whole thing became a self-fulfilling prophecy. For the last five years everyone else has just been making up the numbers.

But by the same token, those high-speed network effects mean that when the end comes, it can come rapidly. In June 2017, everyone was using Poloniex. By the end of the year, it was a ghost town. The reason: Binance arrived and showed crypto users that something better was possible.

Binance doesn’t need to collapse for this story to play out. But as an exemplar of so much that troubled crypto during its ascendancy – the recklessness, wilful illegality and abject silliness of it all – Binance’s passing may be what the industry needs to reach the next stage of its evolution. We just need something good to push us out of our comfort zone.

Luke from CoinJar

The above information is not to be read as investment, legal or tax advice and takes no account of particular personal or market circumstances; all readers should seek independent investment, legal and tax advice before investing in cryptocurrencies. There are no government or central bank guarantees in the event something goes wrong with your investment. This information is provided for general information and/or educational purposes only. No responsibility or liability is accepted for any errors of fact or omission expressed therein. CoinJar Europe Limited makes no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability, or completeness of any such information. Please remember past performance is not a reliable indicator of future results. Don't invest unless you're prepared to lose all the money you invest. Due to the nature, complexity and volatility of crypto, it may be perceived to be a high-risk investment.

CoinJar Europe Limited is authorised by the Central Bank of Ireland as a crypto-asset service provider (registration number C496731).