Cryptocurrencies have reacted with significant volatility to the news that Binance CEO Changpeng Zhao has stepped down as the company agreed to pay $4.3 billion in settlement to the US government.
CZ’s departure and the hefty fine from the US regulator could be a major blow to the world’s largest cryptocurrency exchange and to the crypto market as a whole. But could it also be just a staging post in the advancing maturity of the crypto market in the long run?
While the Binance settlement is a positive step, it is also a reminder for traders of the risks associated with operating and investing in the cryptocurrency space. The crypto industry has been under increasing scrutiny as the sector sees successive major failures and issues.
“As much as additional regulation could put some pressure on the market over the short term by driving away certain investors, it could open the way to broader adoption and safer access to this class of assets,” opined Denys Peleshok, head of Asia at CPT Markets in Malaysia. “Steps toward facilitating a wider adoption could help strengthen the markets’ rebound during the last few weeks.”
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It seems that the crypto markets are still trying to get rid of the negative sentiment that came with the return of judicial events to the forefront of the news agenda again. The founder and CEO of the Binance confessed to the charges against him and agreed to pay a fine of $4.3 billion, this was subsequent to the lawsuit filed by the Securities and Exchange Commission. The SEC also filed against the third largest crypto exchange, Kraken, with several charges.
Some commentators think this cloud still has a silver lining, especially for top tier cryptocurrencies.
“The next stage ahead for Binance, [will see it] subject to close double monitoring by the Ministry of Justice and the Ministry of Treasury for several years to ensure compliance with the laws, [which] may reduce regulators’ concerns about the possibility of manipulating prices in the market and add more transparency in the sector,” said Samer Hasn, at CFD broker XS.com in Dubai.
This, in turn, may increase the possibility that the SEC may approve the launch of Bitcoin spot ETFs sometime next year, as one of the biggest concerns about these ETFs has been the risk of price manipulation.
It is a view shared by senior figures in the wealth management industry. Nigel Green, CEO of deVere Group, said: “CZ until now has been the most influential and powerful person in crypto. As such, this scandal is going to trigger some short-term volatility in the market as investors digest the news. However, the crypto market will thrive as institutional money is pouring in and we expect it to continue to do so.”
BlackRock, the $9 trillion asset manager, alongside WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise and Valkyrie Digital Assets, have published Bitcoin ETF applications waiting to be approved by the US Securities and Exchange Commission.
“We believe that Bitcoin ETFs are an imminent inevitability, and this would help drive crypto prices and mass adoption,” said Green.
Good news for blockchain?
Other commentators feel it is time the entire cryptosphere gets out of the way and lets blockchain come of age.
“This is just the latest instalment in the welcome demise of the unregulated cryptocurrency market,” said Andrew Carrier, part of the executive leadership team at Quant. “Cases like those surrounding FTX and Binance have come to symbolise the downfall of the ‘crypto bro’ persona – as these high-profile figures are officially moved from cowboy to outright criminal. The good news is that much of the world now has regulation in place to tackle fraud and ineptitude in decentralised finance. DeFi, and its underlying blockchain technology, does have a future, but it will mature and professionalise to the point it is culturally unrecognisable.”
Carrier thinks that as the poorly designed elements of the crypto world are forced to either grow up or disappear, hopefully more people will turn their attention to what he calls the ‘real gold’ here. “That’s not crypto but the technology behind it: blockchain,” said Carrier. “With it, we can provide the world’s economies with a genuinely more valuable form of money: digital currencies that are regulated, backed by fiat deposits, and come up with useful features like the ability to automate various types of transactions.”
It is all setting up for choppy trading conditions in the Bitcoin market as US traders take the next few days off for Thanksgiving – if they are sensible!
According to data provided by Deribit, tomorrow (Friday) will be the execution date for what are equivalent to more than $4 billion worth of options contracts for Bitcoin, with more than 107 thousand contracts in play, representing part of more than a staggering 14 billion options outstanding. The put/call ratio is 0.82 for options whose execution date falls tomorrow.
This coincides with a further record rise in the value of open interest for Bitcoin futures contracts, which reached approximately $15.93 billion, a new highest level not seen since April of last year.