How recent allegations reveal risks of centralized exchanges and why self-custody matters for crypto investors
Over the last two months, Binance has been at the heart of intense controversy. Accusations allege the world’s largest crypto exchange manipulated markets through coordinated sell-offs, spoofing orders, and profiting from liquidation cascades. Bitcoin, Ethereum, Solana, and Binance’s own token BNB have all been implicated. Onchain data reveals over $2 billion in Bitcoin dumped in a few weeks, sparking more than $1.2 billion in long liquidations during September 2025—a month when Bitcoin plummeted from $124,000 to $17,000. This article unpacks the Binance controversy, compares it with historic cases like Bitfinex, and offers practical lessons for crypto holders seeking to protect their investments in a market where centralized platforms may not have retail users’ best interests in mind.
Binance Allegations: Market Manipulation or Market Madness?
Between late August and early October 2025, observers noticed unusual onchain flows linked to market makers like Wintermute. Billions of dollars of Bitcoin were apparently sold off rapidly. This forced mass liquidations — where leveraged traders are automatically forced to sell assets — creating a cascade of price drops.
Binance CEO Changpeng Zhao (CZ) publicly painted a bullish picture, tweeting that the crypto bull market was just beginning. However, behind the scenes, the onchain movements suggested a different story. Coordinated Bitcoin dumps contributed to extreme volatility, shaking retail investors and raising questions about Binance's role.
What does “liquidation harvesting” mean?
Liquidation harvesting is when large players intentionally push an asset’s price down to trigger forced sales by leveraged traders. They profit by buying these assets back at lower prices. This tactic exploits retail investors who use leverage, magnifying their losses.
Historical Echoes: Binance vs. Bitfinex
Binance’s alleged behaviors recall the Bitfinex saga from 2017 to 2021. Bitfinex and its associated stablecoin, Tether, were accused of deceptive practices. At times, Tether was only 27.6% backed, yet billions in unbacked tokens inflated demand for Bitcoin artificially. This pushed Bitcoin prices higher while exposing traders to massive losses during sharp corrections.
Bitfinex faced regulatory action, including fines exceeding $60 million and trading bans in certain jurisdictions. Binance’s ongoing probes in the US and Europe haven’t produced definitive rulings yet, keeping their situation speculative but systemic given Binance’s dominant market share (over 50% of global crypto trading volume).
Data Callout: In September 2025, Bitcoin’s price crash from $124,000 to $17,000 coincided with $2 billion in Bitcoin sells tied to Binance-linked onchain flows, triggering $1.2 billion in long liquidations.
Why Centralized Exchanges Remain a Structural Risk
Centralized exchanges (CEXs) like Binance control critical infrastructure: order books, liquidity, and asset custody. This control allows for asymmetric information and potential exploitation. The promises of transparency and neutrality often clash with profit incentives.
Bitcoin’s original vision by Satoshi Nakamoto favored decentralization and trustless consensus precisely to avoid gatekeepers who could manipulate markets. When you hand over your crypto to a CEX, you’re trusting them with your keys—and exposing yourself to risks beyond market moves: counterparty risk, manipulation, and operational failure.
Alternatives that put you in control
- Hardware wallets: Devices like Ledger, Trezor, or BitBox let you hold your private keys offline, reducing hack risk.
- Decentralized exchanges (DEXs): Platforms such as Uniswap or dYdX enable peer-to-peer trading without surrendering custody.
- Multi-custody and privacy tools: Spreading risk across wallets and using privacy-focused DEXs align closer with crypto’s ethos.
Binance vs. JP Morgan: The Two Sides of a Manipulation Coin
Binance’s tactics mirror strategies seen in traditional finance. For years, JP Morgan CEO Jamie Dimon publicly dismissed Bitcoin as a fraud or Ponzi scheme, while his bank quietly developed blockchain tools and gained exposure to crypto assets like BlackRock’s Bitcoin ETF.
- JP Morgan approach: Publicly downplay Bitcoin, privately accumulate.
- Binance approach: Publicly hype Bitcoin, privately offload large volumes to trigger liquidations.
Both demonstrate how centralized entities manipulate narratives for profit, exploiting retail investors’ trust to serve self-interest.
What Could Go Wrong? Risks to Consider
- Unproven allegations: At this point, Binance denies manipulation claims; investigations are ongoing but no final verdict exists.
- Regulatory uncertainty: Increased scrutiny might lead to fines, operational restrictions, or liquidity impacts.
- Market volatility: Engineered dumps cause wild price swings, hitting leveraged traders and amplifying losses.
- Counterparty risk: Relying on centralized platforms exposes you to black-box operations and potential insider advantages.
- Loss of trust: Continued scandals could erode user confidence, triggering further market instability.
Answer Box: Did Binance cause Bitcoin’s crash in September 2025?
While Binance denies wrongdoing, onchain data confirms over $2 billion in Bitcoin sell-offs linked to the exchange’s market makers. These flows triggered $1.2 billion in long liquidations, coinciding with Bitcoin’s dramatic drop from $124,000 to $17,000 that month. This suggests Binance’s activity played a significant role in amplifying the crash.
Actionable Summary: What Crypto Holders Should Do Now
- Treat centralized exchanges with caution — they’re not your asset’s true home.
- Shift long-term holdings to self-custody solutions like hardware wallets.
- For active trading, explore decentralized exchanges that keep custody in your hands.
- Diversify custody methods to reduce counterparty risk.
- Stay informed on regulatory developments and onchain analytics that flag unusual market activity.
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FAQ: People Also Ask
Q1: What is liquidation harvesting in crypto markets?
A: It’s a tactic where large players push asset prices down to force margin calls and liquidations on leveraged traders, then buy assets cheaper to profit.
Q2: How can Binance sell-offs trigger liquidations?
A: Massive coordinated sell orders reduce market price rapidly, causing leveraged long positions to be automatically closed at losses, cascading further selling.
Q3: Why is self-custody preferred over exchanges?
A: Self-custody means you hold your private keys, eliminating counterparty risk and reducing exposure to exchange failures or manipulative tactics.
Q4: Has Binance faced regulatory penalties like Bitfinex?
A: Not yet. Binance is under investigation in multiple regions but has no definitive fines or bans so far.
Q5: How does JP Morgan’s approach to Bitcoin compare to Binance’s?
A: JP Morgan publicly criticized Bitcoin while secretly investing in blockchain, whereas Binance allegedly hyped the market publicly but sold off assets behind the scenes.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Crypto investments carry risk, including total loss. Always conduct your own research and consider professional guidance.
Protect yourself from crypto chaos—embrace self-custody, diversify risk, and stay informed. For deeper insights, join Wolfy Wealth PRO and master the market’s hidden moves.
By Wolfy Wealth - Empowering crypto investors since 2016
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