Since the collapse of the FTX exchange in November 2022, major crypto exchanges have experienced significant changes in their Bitcoin reserves. The inability of FTX to maintain sufficient reserves to meet user requests exposed flaws in its controls and emphasized the importance of transparency and reliable reserve reporting among all crypto exchanges.
The aftermath of the FTX collapse led to a decrease in investor confidence and a shift in the structure and functioning of the crypto market. Many investors began to question the safety and stability of the market, prompting exchanges and projects to implement new security measures such as two-factor authentication and monitoring systems.
One emerging standard to protect user funds is the proof-of-reserves (PoR) mechanism, which allows exchanges to publicly demonstrate that they have enough assets in reserve to cover all user balances. This standard fosters trust and transparency, crucial in rebuilding confidence following high-profile exchange collapses.
Among the major exchanges, only Coinbase does not publish PoR reports. Binance, one of the largest exchanges, saw a 5% increase in its reserves, reaching 611,000 BTC, despite pressure from U.S. authorities in 2023. Three key exchanges, including Coinbase Advanced, Binance, and Bitfinex, hold 75% of all Bitcoins held by exchanges, totaling 1.836 million BTC.
Currently, Binance, Bitfinex, and OKX show small decreases in reserves, with Binance being the only exchange that has not experienced significant drawdowns since the FTX crash. While industry leaders have managed to shore up their reserves, the failure of some exchanges to publish PoR reports indicates that full transparency is still a work in progress.
The bankruptcy of FTX highlighted the importance of exchanges proving they have enough reserves to meet user demands. This event has led to a shift towards exchanges that demonstrate proof of their assets on-chain, ultimately rebuilding trust and ensuring exchanges can back up their users’ funds. As the industry continues to evolve, the focus on transparency and security measures will be crucial in maintaining user confidence in the crypto market.