Binance, the popular cryptocurrency exchange, suffered a temporary issue with spot trading that impacted withdrawals and deposits. This caused Bitcoin to drop from $28,100 to $27,500 in two minutes. The incident highlights the risks associated with leaving crypto on exchanges and the importance of holding it in cold storage. Meanwhile, Deutsche Bank is showing signs of financial strain with its credit default swaps pricing in a 31% probability of default for sub bonds and 16% for senior DP paper. The Federal Reserve is also facing challenges as it added another $93bn to its balance sheet last week, raising concerns over inflation.
The Dangers of Holding Crypto on Exchanges
The recent temporary issue on Binance impacted spot trading which caused the company to suspend withdrawals and deposits. This resulted in Bitcoin dropping from 28.1 to 27.5 just in two minutes. While some people are guessing that there’s a mismatch of funds, it is important to note that holding crypto on exchanges puts your investment at the whim of the company. If an exchange experiences a massive blow up and becomes insolvent, you might not be able to get your crypto back. Therefore, it is suggested to get crypto off exchanges and into cold storage or a hot wallet where you hold your own keys.
Current State of the Banking System
The Federal Reserve recently had to add another 93 billion to their balance sheet due to an emergency facility set up with banks to increase liquidity. They also have a lot of treasuries that are going to expire soon. Banks are breaking as Deutsche Bank’s credit default swaps show a probability of default at 31 for sub bonds and 16 for senior DP paper. Deutsche Bank has reached out to the government to tout their liquidity and capital position but it seems like the bank may be in trouble.