If Binance Isn’t Safe, What Is?

It's been a while since I've done market talk, but this feels like a week worth discussing. Bitcoin closed its fourth consecutive week in the red, and yesterday's selloff suggests a fifth may be coming. The weakness hasn't been confined to crypto. Gold touched its lowest level in a year on Friday, and the S&P 500 and Nasdaq sold off again yesterday ahead of today's midterms; Polymarket gives Democrats a 76.5% chance of controlling the Senate. It's fair to say October was a good month to hold cash.

I don't know whether this is a bull market correction or whether the rally has run its course. But looking beyond prices, what concerns me most about crypto right now is security. Last Thursday, Nick Carpinito's newsletter covered the rise in crypto exploits: more than 300 this year, up 111% YoY. Talk about timing, as later that same day Binance suffered the largest crypto theft ever, about $6.3B, roughly four times Bybit's $1.5B in 2025. Yesterday, Brazilian exchange Mercado Bitcoin suspended deposits and withdrawals after about $40M in unauthorized transfers.

The silver lining is that both exchanges say customers won't bear the losses. Binance has already resumed withdrawals, with about $3.0B in net outflows over the past 24 hours and $15.4B over the past seven days, which includes the hack itself. Notably, Binance still holds about $125B in assets and has the balance sheet to absorb outflows of this size, which is encouraging, but I think there's a deeper confidence problem at play. If even Binance, the largest exchange in the industry, can suffer a breach of this scale, it's hard to imagine someone who doesn't spend their time in crypto feeling comfortable allocating to it.

After this year's self-custody incidents, I would have told a friend outside crypto to just keep their funds on a large exchange. A Coldcard firmware flaw let attackers drain about $116M in BTC in July, and last month tampered Ledger devices sold through a reseller were linked to roughly $93M in losses. After last week's events, it seems that advice wasn’t that solid either. 

That leaves the industry with an uncomfortable problem. Self-custody, the ability to take full control of your money, remains something of a utopia: It works for a small group of users comfortable with the responsibility, but for most people, that responsibility is still too much to ask. I think this leads to two things.

First, ETFs will capture a growing share of new allocations to assets like BTC and ZEC. Investors were clearly spooked on Friday, the day after the Binance hack, with US spot bitcoin ETFs seeing about $643M in outflows, more than wiping out the week's earlier inflows. Even so, I expect new flows to keep concentrating in ETFs. Until Friday, they had taken in about $760M over two weeks even as the price fell, and US Zcash ETFs have added about $70M since Oct. 20. 

Second, if people are reluctant to hold crypto today, what will persuade them to use it? Stablecoin supply is one of my favorite proxies for onchain liquidity. Over the past year, supply has been basically flat, sitting near $286B today. Little new capital has come onchain. 

I think this also explains why most success stories over the past year have come from protocols reaching beyond a crypto-native audience. Hyperliquid's TradeXYZ markets, which ICE plans to bring into a US-regulated structure, are a good example of bringing in TradFi users. Others include Collector Crypt in collectibles, tokenized equities driving activity on Uniswap, and Kamino listing RWA assets as collateral. 

To me, a key takeaway is that the protocols worth watching are the ones merging with traditional finance or serving users beyond crypto natives. Basically every quality project is pursuing this path: EtherFi, Ethena, Aave and Plasma are building neobanks, Hyperliquid is becoming more than a crypto exchange, Fomo and Pump are trying to onboard the retail masses through social trading, and so on. The concept of "crypto" will fade, and protocols without a path toward that vision won't survive. 

— Carlos

Hyperliquid’s priority fee revenue hit an all-time high of $1.16M last week.

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