- 30% is hold in USDT (for which there is 0 proof that it is 1-1 backed)
- 10% is hold in its own stablecoin BUSD (Not always 1-1 backed source)
- 5% is in its own native token BNB
- 15% is in small cap (shtcoins)
source*: https://protos.com/binances-stablecoin-busd-hasnt-always-bee...
As in, Binance hasn't failed if USDT goes to zero but you're still able to withdraw that Tether you have in Binance.
They've even admitted that it's not 1-1 backed by fiat themselves, so pretty safe assumption to make.
It might cause a ripple effect where other people do the same in other exchanges out of fear.
One day people on the "normal" stock market will also wake up to similar things happening there and will start moving shares from ponzi brokers to the direct registration system.
If Binance wasn't "fractional reserve crypto broker" (aka: ponzi) we wouldn't be having this discussion.
In one case you buy a Bitcoin and you get to own a Bitcoin.
In the other case (Binance) you buy a Bitcoin and don't get to own a Bitcoin (or in the very best case: you might or might not get to own that Bitcoin you bought).
Not the same.
And even then: the kind of leverage that you are playing with has limited upside and unlimited downside so it isn't for everybody. Trading in stocks at least has a limit on the downside (but lacks the degree of leverage that you can get with shorting). The main risk that you've correctly identified is that even the best information will come with caveats around the timeframe, the next being that you can't assume you are dealing with rational actors.
That's why you see parties that short based on relatively unknown information publish that information as loud as they can after they've made their trades so that they can control the timing to some extent.
Shorting downside can be capped and leverage gained by purchasing puts.
Trading stocks long absolutely has leverage from margin and even much further leverage available through the purchase of calls.
Case in point...
If not for that the US dollar would evaporate but as long as all of these people believe in it and use it as the reserve currency for the world the US dollar has nothing to fear. It may fluctuate but you can't do a 'bank run' on the USD. You can do all of the usual forex tricks (including shorting the USD) depending on how much your own belief is at odds with a counterparty that holds a (slightly) different belief. George Soros famously made a fortune (a cool billion, which was a lot of money in the day) doing just that with the British Pound.
Individual banks may go under, but they all use the same underlying currencies. Binance has a similar problem (but different in many important respects). The number of people that 'believe' in Binance is a lot smaller and if enough of those people want their money (for instance USD!) back then Binance had better cough them up or they'll go bust. If you don't have a deposit there you are likely either a neutral party or you are already liquid (in that case: good only). If you do have a deposit there and you're willing to let them hold on to it then you are betting that they will stay in business.
I don't know about your financial situation but if you can't afford to lose your money then you may want to update your status bits on this news, a $2B outflow in a short period of time is not something a company like Binance can sustain indefinitely, where 'indefinitely' is something like '30 days'. It will be interesting to watch this play out and to see if they manage to hold the fort. Personally I would be highly surprised if they can sustain a drawn out run. But if they somehow can they'll be attracting a lot of business.
The government requires you pay taxes in USD and will lock you in a cage by force if you do not. It requires that you accept USD as valid for commerce and again will lock you in a cage by force if you do not. If you attempt to counterfeit the currency, again locked in a cage by force.
The USD is as strong as the government's monopoly on force.
Crypto currency is backed by either nothing ("people faith" waves hands in a rainbow gesture) or some dude named Dan in Ohio or whatever.
Others have mentioned the problems with this statement, but I'd like point out that it's also literally untrue. The coinage act of 1792 created the US dollar:
> Dollars or Units - each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver.
BUSD on BSC has been demonstrated to not at all be backed by enough BUSD on Eth as managed by Paxos (which does seem to be backed)
The Tether fraud has only really been rip roaring for about 4 years. We're still so early :^).
Same for Paxos.