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Binance CEO Says Why You Should Avoid Exchanges That Do This

Sun, 11/13/2022 - 10:31
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Arman Shirinyan
CEO of biggest exchange on market explains how to avoid losing funds on crypto trading platforms
Binance CEO Says Why You Should Avoid Exchanges That Do This
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Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of U.Today. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.

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Changpeng Zhao, Binance CEO and a person who is now considered one of the most influential personas in the whole industry, highlighted one important fact that cryptocurrency exchange users should see as a red flag.

It is the movement of large amounts of cryptocurrency from exchange-related addresses before or after they demonstrate their wallet addresses. Binance CEO's concern is more than justified. Usually, centralized exchanges that operate smoothly do not have to constantly move large amounts of funds during a period of high load.

A flurry of large transactions toward an exchange is the first sign of active liquidation of the exchange's external holdings. Technically, cryptocurrency exchanges should not move users' funds outside of the platform's ecosystem since it creates liquidity risks.

Once an exchange's liquidity falls below a certain point, an unexpected spike in withdrawals will most likely cause a situation similar to FTX's. After a few failed withdrawals, panic in the community emerges and the liquidity crisis spiral accelerates, causing a congestion on the network and a complete halting of withdrawals.

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To avoid scenarios described above, users should keep a close eye on operations in exchange-related wallets. If a series of suspicious transactions appear on the network, it would be a wise decision to move funds away from the trading platform and store them safely in a non-custodial wallet.

If you are willing to minimize exposure to the aforementioned risks, the safest way to do so is to move funds away from a centralized exchange to your own non-custodial wallet. By holding funds in your own wallet with your own private keys, you will avoid situations like the FTX liquidity crisis and inability to withdraw and use your own funds.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.