Binance is balls-deep in Tether (over $17 Billion USDT) while under the gun of regulators. If a rush on capital occurs on the exchange, some serious dominoes are going to fall…and you will likely get boned. If you’re smart, DO NOT store your coins (or cash) on Binance right now.

It's not new news that Binance is using Tether to support leveraged trading across the exchange…https://www.binance.com/en/blog/391838076530913280/Binance-Futures-Trading-Platform-Increases-Max-Leverage-to-125x-with-BuiltIn-Risk-Controls-for-Traders. (the overseas Binance, leverage trading is not allowed in binance.us)

And also not news that Tether is being "backed" only by some suspiciously unknown (most likely fractional) percentage of cash and "commercial paper" from unknown entities. https://www.coindesk.com/tether-first-reserve-composition-report-usdt

Binance is currently holding $17 BILLION Tether in its wallet. https://wallet.tether.to/richlist .

The cycle seems something like this: Binance puts up some amount of collateral to Tether Treasury (likely some cash with the rest "commercial paper"). Tether prints more Tether, loans it to Binance. Binance uses the new magic minted tether to give margin traders higher leverage to buy more Bitcoin….Bitcoin price goes up, more capital comes in, never ending cycle continues. You should get the picture why this is bad without the word "PONZI"

Multiple countries are once again cracking down on Binance. We've seen this happen before, but there's no certainty regulators won't come down harder this time. Any number of things could trigger a rush of withdrawals (eg. a margin-call on all leveraged accounts) from Binance

IF there is a sudden rush of withdrawals from Binance for whatever reason (and that rush coincides with a drop in Bitcoin prices), the exchange is going to have a dual monster on their hands. Say the US and EU regulators decide to team up to hit Binance/Binance.US with some mega regulations.

Coinciding with a decrease in BTC price, they're also going to be margin-calling a ton of those leverage accounts…inevitably resulting in heavily forced liquidations (to USDT).

If that worst-case scenario happens, at some point they're also going to have to try to redeem all that tether they're holding for cash. But…as we've recently learned, Tether does not likely have any account with billions of dollars in liquid cash available, and Binance has an "IOU" with them anyway….so Tether says "sorry Binance, you have this on loan, you're SOL".

There is no telling how leveraged Binance is in unbacked Tethers.

So what does Binance do when they can't get liquidity to facilitate withdrawals?

It's not that unrealistic of a story given the current environment. If you need to use Binance, it should be a quick in and out. Until things chill out with the regulatory environment, leaving any coins in there is asking to get burned.