Centralized exchanges with dollar liquidity in USDT are not the best place to trade

09.05.2022 |

For article about BitFinex and Binance

As we have already considered, the termination of the activity of Tether, issuing USDT and operating its collateral, remains only a matter of time. The current asset structure will not allow the company to comply with the planned regulation in the United States. Even if the company’s management wishes, it will not be possible to quickly bring the software into the field of new requirements, and the license agreement does not oblige Tether to reimburse the cost of each coin. Thus, large players may remain with their own, but small traders may suffer greatly.

Consider the largest cryptocurrency exchanges that conduct their main activities not in cash dollars or their analogues on licensed payment systems, for example, Perfect Money, but in stablecoins, where the leading role is occupied by USDT.

Binance is the largest player who does not admit his mistakes

In fact, it was in the interests of Finance that more than 10%, namely about 16 billion of all USD coins, were issued. Thus, in the event of Tether’s bankruptcy, a centralized exchange may incur enormous losses that will fall on the shoulders of ordinary users.

There is almost no doubt that traders will have to pay, because Binance’s attitude to its users has repeatedly manifested itself in a not the best way. An illustrative example occurred recently. The sanctions were imposed on users who sent Dogecoin from their accounts to third-party addresses in late 2019 and early 2020. More than one and a half thousand traders were not just blocked on the site, but all funds were confiscated, and if there were not enough funds to cover the difference between the rate of the joke coin of that time and November 2021, then the balance turned out to be negative. This situation was connected with a software error in which the transaction hung in the pool without actually ending, which made it possible to double spend when updating the client.

At the same time, the developers of DOGE advised the representatives of the exchange on this issue, but apparently no concrete steps were taken. At the same time, the founder and main owner of Binance Changpeng Zhao has no particular reason to worry. Even if the work of his cryptocurrency exchange is stopped, for example, by the decision of the authorities of the United States, where it will not be so easy to get a Binance license, he will simply open a new project. His reputation is highly trusted, and even the case of DOGE will not particularly affect it. Therefore, if you use this exchange, you should be extremely careful.

At the same time, it is worth considering that the bankruptcy of Tether will cause a significant blow, but it will still allow Binance to continue working — most of the volumes on users’ accounts are in free cryptocurrencies, however, those who have USDT, or traders who have decided to switch to a less volatile asset for a while, may suffer greatly.

Bitfinex is the fourth USDT holder

Another centralized exchange, Bitfinex, does not have such a rosy picture. More than eight billion USDT coins were issued in his interests. Although after two hacks that led to significant losses in 2015 and 2016, all funds have been reimbursed to users, however, it is impossible to speak about the complete integrity of the exchange.

Unlike Binance, the turnover on this exchange is not so large, and in the event of Tether’s bankruptcy it will not be possible to keep such a large amount of assets, then there is already a non-zero probability of a full scam, as was the case with BTC-E. Therefore, it is worth carrying out operations on this site with caution, especially large volumes.

In the latter case, it is always more convenient to use the OTC transaction service. In this case, not only there is no need to bring funds to some site for a long time, but also to get a fixed rate close to the market rate at the time of the transaction without drawdown due to a large offer. Also, Cryptex, in addition to direct exchange, allows its users to place orders on a p2p platform, where you can always set the desired rate manually or with reference to a reliable liquidity provider. At the same time, a long period of flawless work and the peculiarity of trading, including without the possibility of using leverage, can significantly increase the reliability of providing services and reduce the likelihood of losses of the site.

Undoubtedly, centralized exchanges allow trading cryptocurrencies in a wide range, however, it is always worth paying attention to the company’s business model and attitude to traders, who, in fact, bring the main profit.