No, Binance didn't get big because of Tether or leverage. It was already eating most of the crypto-only exchanges volume when altcoins were almost exclusively paired with BTC and before it acquired its perpetual futures business.
The main reason they managed to attract so many users is flamboyant altcoin pump and dumps orchestrated with ICO teams and Chinese whales, and pioneering exchange coins with the securities/utility token mash-up called BNB. Users came to chase the pumps, and stayed when they were invested in the platform itself.
Binance's thriving in its later phase even as Coinbase ramped up its altcoin listings can certainly be attributed to Tether though.
> It works flawlessly even when the market is hot.
That's factually false. It holds up better than Coinbase sure, that's not hard, but it very frequently gets overwhelmed during volume spikes. The web UI and the various price feeds often fall behind. The orderbook feed falls out of sync even during normal usage hours. The more robust part of their stack, the trading API, rarely goes down though, I'll give you that.
I guess your comment makes my point about BNB. It's a great way to keep customers loyal and engaged. I do agree that overall it is the best cryptocurrency exchange, but let's not use HN as a shilling avenue.
2. I have had way less problems with Binance than Coinbase, so I am a happy Binance customer.
>In 2005, he moved to Shanghai where he founded Fusion Systems, known for "some of the fastest high-frequency trading systems for brokers." (wikipedia)
He presumably knew his stuff.
To be fair there were other exchanges that tried this 'invest in the house' gambit, but Binance made it stick.
I'm also broadly in agreement with your conclusions as to what this means for a crypto trader or holder. I've zeroed my net exposure to this ecosystem myself, both in anticipation for such an event, and out of recognition that I frankly understand it far less well than I originally thought.
It is kinda sad that in this technology there are so many frauds like that.
Probably wise given how correlated ETH and BTC prices are.
>It is kinda sad that in this technology there are so many frauds like that.
It is, but it is also unavoidable.
As the author correctly points at towards the end, many of the properties of cryptos (high liquidity, non-reversible, pseudo-anonymous), while very useful to legitimate users, are a wet dream for crooks.
As a matter of fact, Bitcoin has been used to scam people for its entire existence, e.g.[1][2], sometimes even in new and innovative ways.
There is one aspect of Bitcoin that many people entirely overlook, especially newcomers: [3]
[1] https://en.bitcoin.it/wiki/Trendon_Shavers
[3] http://trilema.com/2013/the-story-of-pointless-and-witless/
Thanks for taking the time and effort to put this together. I'm sure it'll help some people avoid a costly lesson.
This seems to be one constant of BTC: "events" which you might expect to have a negative effect on the price often don't.
For me, it's almost 100% aligned with what I've felt was going on with Tether in the last 2 years.
Also, it sort of crystallized an answer to a question I've had about Binance for quite a while: how did they manage to get so big, so fast.
Answer: easy, they never had to establish proper on and off ramps to the traditional banking system and lured customers with unreasonable leveraged offers (which BTW is another Tether-related scam in itself: if you are an exchange with a shit ton of USDT, you can manipulate the price up and down, and trigger artificial margin calls whenever you damn please).
The real interesting question is though: what will happen when (not if) Tether explodes. There will be a sudden huge demand for exiting from USDT, and the only way looks like buying BTC on semi or fully fraudulent unbanked exchanges (good luck with that).
This will also trigger a big price unbalance between exchanges, and it remains to be seen if arbitrage channels will be able to weather the storm and if so for how long.
If you hold USDT, better get out quick unless you want to be left holding the bag.
If you hold BTC (as in: for real, in your own wallet, not on some shady exchange, not your keys not your coins), it's likely the BTC ecosystem is going to undergo a very large "event". Up or down, who knows.
If you hold BTC on an exchange, especially a shady one with 100x leverage type offerings, get your coins out of there ASAP before you get BTC-E'd [1]
[1]: https://en.wikipedia.org/wiki/BTC-e