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The cryptocurrency world is experiencing challenges, and it’s not just Sam Bankman-Fried on trial for fraud in New York who is feeling the pressure.
The Bloomberg Billionaires Index recently revised its estimate of revenue for the cryptocurrency exchange Binance, reducing it by 38%. This correction came as data indicated a decline in trading volumes at the exchange throughout the year. Consequently, this correction led to a substantial reduction of $11.9 billion in the fortune of Binance’s founder, Changpeng Zhao, commonly known as CZ, lowering his wealth to $17.2 billion.
CZ, aged 46, was also involved in the events that led to Sam Bankman-Fried’s appearance in federal court. In November, CZ announced the liquidation of a token associated with FTX after a report revealed that Bankman-Fried’s hedge fund, Alameda Research, held a significant position in it. This news prompted some FTX customers to swiftly withdraw their funds, overwhelming the exchange, which ultimately declared bankruptcy less than a week later.
This sequence of events resulted in Bankman-Fried’s wealth plummeting to zero, despite peaking at $26 billion in March of the previous year.
The Bloomberg Billionaires Index calculates Binance’s revenue by analyzing spot and derivatives trading data from cryptocurrency-tracking services like Coingecko and Coinpaprika.
While Binance managed to gain market share earlier in the year, achieving a peak of 62% of total on-exchange cryptocurrency trades in the first quarter, it did so by offering zero-fee promotions for popular trading pairs. However, once this offer concluded, Binance’s market share decreased to 51% by the end of the third quarter, as reported by the research firm CCData.
At the time of this report, representatives for Binance had not responded to requests for comment.
In recent months, the cryptocurrency exchange has faced increasing isolation from the traditional financial system.
The Securities and Exchange Commission (SEC) filed a lawsuit against Binance in June, while the Commodity Futures Trading Commission (CFTC) pursued legal action earlier in the year for non-compliance with rules that allowed US users to access Binance. Regulatory authorities accused the firm of lacking sufficient money-laundering controls, inflating trading volumes, and mishandling client assets. Binance has contested these allegations and is vigorously defending its position in court.
In June, Bloomberg’s wealth index reassessed the value of Binance’s US exchange to zero when it announced that it would no longer engage in transactions using US dollars, causing trading volumes to plummet dramatically. In a funding round conducted in March 2022, Binance.US had been valued at $4.7 billion, whereas CZ’s net worth reached a peak of $96 billion in January of that year.
It is important to note that the pain is not exclusive to Binance, as regulatory uncertainties and rising interest rates have made alternative investments more appealing. As evidence, spot trading volume at Coinbase Global Inc. experienced a 52% decline in the third quarter compared to the previous year, according to CCData.
