Highlights
- Binance Exchange maintains sufficient reserve to counter high open interest demand
- OKX also maintains a low liquidity ratio per a CryptoQuant report
- Exchanges with fair liquidity risk levels include Gate, Bybit and Deribit
Crypto analytics platform CryptoQuant has conducted a deep dive research into Binance and other centralized exchanges to uncover how susceptible they are to liquidity risks. With the crypto ecosystem trading at a very high premium, exchanges require high liquidity to meet growing demands. Of its findings, CryptoQuant singles out Binance and OKX as platforms to watch out for.
What Makes Binance Stand Out from Centralized Exchanges?
According to CryptoQuant, it analyzed the leverage levels of top centralized exchanges. It conducted this exercise to evaluate their liquidity, default risk and how crypto reserves backs trading activity. The analysis also employs leverage ratio calculation to estimate trader’s exposures.
Based on this, the analytics firm singled out Binance as an exchange with robust reserves. The trading platform maintains this reserve despite the significant growth in open interest this year. This is signficant, considering how Binance Futures list new tokens to fuel this expansion including Solana’s Fartcoin.
“Its reserves in Bitcoin, Ethereum, and USDT comfortably exceed its open interest. Binance also reported the lowest and most stable leverage ratio among major exchanges, with a ratio of 12.8 in December 2023, rising slightly to 13.5 in December 2024,” the CryptoQaunt report reads.
As pointed out, this stability and the 2.6x expansion in Bitcoin open interest on the platform from $4.45 billion to $11.64 billion implies that the exchange can handle unexpected liquidations.
Centralized Exchange Leverage Risk on the Midst of the Upcoming Bull Run
We assess the leverage levels of various crypto exchanges to evaluate their liquidity, default risk, and the extent to which their perpetual futures trading activity is backed by their crypto reserves.
Our… pic.twitter.com/NAadJSAlVT
— CryptoQuant.com (@cryptoquant_com) December 21, 2024
As the report hinted, smaller exchanges like OKX also maintain low leverage ratios.
Centralized Exchanges and Avoiding the FTX Saga
In addition to the Binance spotlight, CryptoQuant also mentioned Gate io, Bybit, and Deribit. However, the report noted that these trading platforms have the highest leverage ratios in the market pegged at 106, 86, and 32, respectively. Notably, this figures show open interests for Bitcoin and Ethereum is higher than the existing reserves available on these centralized exchanges.
The analysis concluded by flagging the impact of high leverage trading, one of the major causes of the FTX Derivatives Exchange collapse. This report serves as an eye opener that can help traders manage risk per platforms they trade on.
Meanwhile, FTX is at the tail end of its bankruptcy proceedings. As Coingape reported earlier, FTX has set January 3 as the date to commence creditor repayment.
CoinGape