In the face of extreme market volatility and unpredictability, Binance CEO Changpeng "CZ" Zhao strongly advised inexperienced and cash-strapped investors to refrain from trading cryptocurrencies.
Zhao suggested to unsophisticated investors on Nov. 14 in a Binance-hosted Ask Me Anything Twitter space that they wait out the turbulent period instead of risking money they need for day-to-day expenses:
“You should not invest in crypto if you’re using money that you need for next week or next month, you should only be using discretionary cash that you don’t need for a long time, like maybe a couple of years.”
Zhao advised inexperienced investors and traders who do possess that spare cash to think twice before investing in the near future:
“If you don’t know what’s going on, don’t try to guess what’s going to happen. It’s very hard to predict. So we will go through a period of high volatility and unpredictability. So unless you’re very experienced, very mature, very confident, and can handle the risk, I would recommend most people just hold for this period of time.”
The spike in market volatility coincides with the FTX crisis that has negatively affected the entire industry - particularly centralized exchanges that have temporarily halted withdrawals.
Zhao, however, confirmed that Binance does not have any such issues. In response to a question regarding why users should remain confident in the exchange, he cited the company's balance sheet as an example:
“We don’t have loans. We don’t have debt. We don’t owe anybody any money. We also did not give loans out of the platform. So we never take user assets and give it to a third party to manage and try to make yields.”
Zhao confirmed that Binance had experienced withdrawals following the collapse of FTX and several other events that affected community trust in centralized exchanges.
Despite the collapse of Binance, he reiterated that the platform would not restrict withdrawals by its users.
Zhao also believes such an event is entirely plausible, stating that once decentralized finance (DeFi) applications become mainstream, centralized exchanges may no longer be required:
“If we can have a way to allow people to hold their own assets in their own custody securely and easily, that 99% of the general population can do it, centralized exchanges will not exist or probably don't need to exist, which is great.”
Despite Binance's centralized nature, Zhao noted that the company's investment partners include both centralized and decentralized exchanges in order to give users a variety of options and support entrepreneurs: “We’re technology agnostic. We’re not trying to centralize everything. We’re not trying to bring everybody onto the centralized exchange. If you’re good enough to use a decentralized exchange, go for it.”