Binance CEO Says Why You Should Avoid Exchanges That Do This

The CEO of Binance and one of the most well-known figures in the entire business, Changpeng Zhao, called attention to a crucial point that customers of cryptocurrency exchanges should take seriously.

Before or after they reveal their wallet addresses, there is a large-scale cryptocurrency transfer from exchange-related addresses. The CEO of Binance has every right to be concerned. Typically, during a time of high load, centralized exchanges that run smoothly do not need to constantly move sizable amounts of money.

The first indication that an exchange is actively liquidating its foreign holdings is a flurry of sizable transactions directed at the exchange. Technically speaking, cryptocurrency exchanges should avoid transferring users’ money outside of the platform’s ecosystem because doing so poses a risk to liquidity.

When the liquidity of an exchange drops below a certain level, an unanticipated increase in withdrawals will probably result in a situation similar to FTX’s. After a few unsuccessful withdrawal attempts, the community begins to panic, the liquidity crisis spiral intensifies, and withdrawals are completely stopped as a result of network congestion.

Users should maintain a close check on transactions in exchange-related wallets in order to prevent the scenarios outlined above. Move money out of the trading platform and securely store it in a non-custodial wallet if a string of dubious transactions starts to surface on the network.

The safest option to reduce your exposure to the aforementioned concerns is to transfer your money from a centralized exchange to your own non-custodial wallet. You can avoid scenarios like the FTX liquidity crisis and being unable to withdraw and utilize your own money by keeping money in your own wallet with your own private keys.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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