Recent lawsuits against Binance and Coinbase have brought the US crypto industry under the scrutiny of regulators. This has caused Bitcoin’s price to dip below $25,000 for the first time in three months.
The correlation between stocks and Bitcoin is now at a 5-year low, with the stock market soaring while Bitcoin is suppressed by the future of the industry in the US.
Exchanges have seen net outflows for 33 days in a row, although the amount of withdrawals is not particularly noteworthy. Binance has seen the largest withdrawals with 7.3% of its balance heading for the exit doors.
The accusations against Binance go beyond securities violations which most centralised companies are facing.
There is no fear that customer assets are in danger, unlike the FTX scandal in November 2022 which saw $8 billion of customer assets go missing. The market reaction is also significantly more muted compared to the FTX situation.
The total balance of Bitcoin across exchanges has seen a slight dip, but it does not stand out in comparison to the downtrend since the start of 2020.
The allegations against Binance and Changpeng Zhao include manipulation of trade volume, encouraging US customers and VIPs to circumvent location-based restrictions, and commingling customer funds.
On Saturday, a US court approved an agreement between Binance and the SEC that would dismiss a temporary restraining order to freeze all Binance.US assets. This has assuaged the doomsday scenario and has reassured customers that their assets are safe.
In conclusion, the reaction to the lawsuits is not surprising and are a reminder of the opaque nature of Binance and the industry as a whole. However, there is no evidence of customer funds being misappropriated, and the fear that was seen in November 2022 during the FTX scandal is not present.
