After FTX, Binance also came to run, how will it affect Bitcoin?
Another storm in the currency circle. Following FTX's bankruptcy and reorganization, Binance, the world's largest crypto exchange, experienced a run last week and a massive flight of funds! As of the data shared by Nansen analysis agency on Twitter on the 17th, Binance disclosed the cryptocurrency assets of its own wallet more than a month ago, totaling 69.5 billion US dollars. Now there are only 54.7 billion left, a sharp drop of 15 billion US dollars in a short period of time, which is shocking.
This incident has not only caused more netizens to discuss whether Binance will follow in the footsteps of FTX, but the "cryptocurrency is dead" discussion has begun to appear again. This time, if something happens to even the largest exchange in the cryptocurrency industry, will cryptocurrency be sentenced to death? Bitcoin and Ethereum is also facing a collapse?
Binance rushed to put out the fire, but users panicked and withdraw money
Looking back at the source of the crisis, there will be a run on Binance, which is related to a series of disturbances last week. First, " Reuters " broke the news on the 12th that the U.S. government would sue Binance. At the same time, Binance temporarily suspended withdrawals of the U.S. dollar stable currency USDC for some reason, causing Binance users to suspect that something was wrong and began to panic and run.
Subsequently, Binance denounced the Reuters content as false reports. Binance CEO Changpeng Zhao, nicknamed "CZ", went to the front line and accepted an exclusive interview with the US media "CNBC".
Unexpectedly, CZ was asked why another cryptocurrency exchange Coinbase had the world's four largest accounting firm Deloitte audit, but Binance did not? CZ immediately answered the question, saying that he was not concerned about Coinbase, but still insisted that his company's finances were audited by another accounting firm, Mazars, so there should be no doubts. Shortly after the
interview ended, on the 16th, Mazars announced that it would suspend services for all cryptocurrency customers, including Binance. Berry, the prototype character in the movie "The Big Short" and manager of the well-known hedge fund , tweeted a lot that the audit reports of all centralized cryptocurrency exchanges are meaningless. The timing was sensitive and it was questioned by celebrities, which of course triggered a wave of capital flight from Binance.
Bitcoin only fell slightly, Binance is not that important?
Zhao Changpeng still insists that the company's finances are sound and the asset reserves are fine. He changed his mind and asked everyone to see the proof on the chain. He also believes that this wave of capital flight is only a short-lived phenomenon and the subsequent development remains to be seen. After the incident, Bitcoin fell by 5% in just 9 days from its peak on the 13th, and has fallen by 1% since December.
Another mainstream cryptocurrency, Ethereum, has fallen by 10% in the few days since the incident, and has fallen by 7% since December. Compared with FTX and Terra Luna, which can often fall by 10% in a day, it is not serious. It is speculated that cryptocurrencies are starting to collapse due to the Binance incident, which is not yet visible.
Perhaps it was just a run on Binance, and it was not serious enough to cause financial problems for the company, so the cryptocurrency trend was not greatly affected. However, many experts are still observing the trend of cryptocurrency in 2023. When will it turn around? If the exchange storms such as Binance and FTX are not the only factors, are they dominated by more critical factors?
Nansen analysis agency, which is still closely tracking the flow of Binance funds, launched a new report this week to analyze the relationship between mainstream cryptocurrencies such as Bitcoin and the U.S. stock market, the U.S. dollar, and the Fed’s interest rate hikes. It was found that the long-term trends of these cryptocurrencies, like those of U.S. corporate stocks , are deeply affected by general economic factors such as the recent Federal Reserve interest rate hike, the strength of the U.S. dollar, and the poor economic outlook.
As the Federal Reserve will still actively raise interest rates in the future, the U.S. economy still has hard landing concerns. Nansen analyst believes that within one year of 2023, cryptocurrencies will most likely continue to fall together with U.S. stocks , and do not think there are signs of a turnaround.
New analysis once again overturns the view that many people point out that cryptocurrency is "digital gold" and has a bear market hedging effect. But what is curious is why the trend of cryptocurrency is increasingly similar to that of ordinary corporate stocks? The following clues may be available for estimation.
Traditional institutions opened up Bitcoin trading, and "Little Buffett" also transferred in. Aikman, the American billionaire investment tycoon known as "Little Buffett".(Source: Senate Democrats, CC BY 2.0, via Wikimedia Commons)
First of all, at the end of November, Fidelity, the world’s fourth largest mutual fund company, launched a service that allows ordinary investors to buy and sell Bitcoin and Ethereum with zero transaction fees. Online brokerages such as IB and Firstrade have launched services for online purchase of Bitcoin, Ethereum and Dogecoin earlier.
Secondly, the American billionaire investment tycoon Bill Ackman, known as "Little Buffett", had previously criticized cryptocurrency as useless. He recently changed his view and pointed out in December that cryptocurrency technology has the potential to bring new businesses, but currently there is a lack of regulation. Therefore, he has invested in 7 cryptocurrency venture capital funds to try out his skills, accounting for less than 2% of his overall assets.
These traditional financial institutions have seen business opportunities and have opened their services one after another, as well as the announcements of Wall Street tycoons, which shows that a group of people who originally invested in stocks are beginning to treat cryptocurrency as asset allocation , and their entry and exit methods can also simulate stock operations.
Under this trend, even if there are problems with exchanges such as Binance and FTX, it will not affect investors to switch to virtual currency transactions launched by traditional institutions such as Fidelity to purchase cryptocurrencies. These new market forces may make the trend of cryptocurrencies look more and more like stocks.
Experts in the currency circle believe that Bitcoin has bottomed out, but the ecosystem is not yet sound.
As for these currency circle storms, what will be the follow-up development? How much impact does it have on currency prices? What do people in the currency circle think?
Capriole investment fund analyst Edward (Charles), who has been observing Bitcoin for a long time Edwards recently tweeted that he believes that Bitcoin has bottomed out in early December, but the recent panic behavior of too many retail investors in the currency circle is called "FUD" (Fear, Uncertainty, Doubt) in currency circle terms. That is, users are excessively fearful in uncertain situations, which is hurting the entire industry and causing too many irrational factors in the decline of Bitcoin. We hope that institutions in the currency circle can do due diligence and improve the ecosystem.
Shaofu (transliteration), chairman of the Japan Memory Blockchain University Alliance who has long-term experience in investing in virtual currency , believes that the rise and fall of cryptocurrency does have an impact on the overall global economy, but the currency circle still has its own themes, such as Bitcoin's four-year cycle theory. In addition, there may be some small platforms that are dragged down by FTX, and investors still need to be careful in the near future.
Traditional forces are gradually entering, changing the trend of Bitcoin.
From this point of view, in 2023, when interest rates continue to rise in the future, cryptocurrency will not be easy to see a quick turnaround. The holders are no longer a pure currency community, which will also bring different impacts. The probability of singing the same tune as traditional stocks has become higher.
In any case, even if retail investors want to grab the bottom, all experts remind them to remember that cryptocurrency has many regulatory issues to be resolved and the overall risk is high. Don’t risk all your money, which is still the most important rule.
