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The SEC’s recent lawsuit against Binance US heralds a grim phase for bitcoin liquidity. Amid a flurry of allegations, withdrawals, and an aggressive regulatory stance, we examine the tumultuous unfolding events and their far-reaching implications on the crypto market and investor sentiment.
Sitting at the intersection of technology and finance, the crypto market is no stranger to stormy weather. Yet, the recent legal tempest stirred by the (SEC) against Binance US, a subsidiary of the worldwide crypto juggernaut Binance, has plunged the platform into notably rough seas.
The mounting tension following allegations of mishandling customer funds, misleading investors, and breaching securities regulations has catalyzed a notable drop in bitcoin’s (BTC) bid-and-ask depth on Binance US, signifying an unsettling liquidity crisis.
As the SEC’s claims reverberate across the crypto world, market-makers have pulled the liquidity plug on Binance US.
Nothing to see here… Binance losing liquidity it seems. #Binance #BTC #ETH #FSN #XRP pic.twitter.com/pUEdSQqkbY
— InspoCrypto (@InspoCrypto) June 8, 2023
Conor Ryder of Kaiko traced the gradual decay of US liquidity over recent months. He commented that this seems to be the straw that broke the camel’s back for liquidity on Binance US.
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With the bid-ask spread experiencing a stark rise, it is clear that the repercussions of the allegations have created a chasm between immediate sale and purchase prices of Bitcoin.
Record outflows from Binance
After these damaging allegations, Binance has faced substantial outflows, recording the eighth-largest net outflow in history—roughly 14,000 Bitcoin.
#Binance continues to experience the consequences of #SEC issues.
— Eugene L. (@e_lokast) June 8, 2023
The net outflow of Bitcoins from the exchange (-14,000 BTC) marks the 8th largest in recorded history!
Data by Glassnode pic.twitter.com/TSXOnmgswb
Despite this, research agency Glassnode offered a ray of hope, suggesting that the outflow’s impact appears somewhat minimal when juxtaposed against the balance held on Binance exchange addresses.
The crypto market understandably reacted with alarm to the allegations, with bitcoin prices experiencing a slump of approximately 2% over the week, wavering around $26,500 as of June 9.
Meanwhile, ether (ETH) has also faltered, dropping more than 2.5 % and now hovers near $1,840.
As the news broke, Binance’s proprietary cryptocurrency, BNB, reacted sharply. As of June 9, its trading value stood at $258.69, reflecting a decline of approximately 16% over the week.
SEC’s broadened clampdown on crypto
The Binance ordeal is just one part of a larger narrative in the SEC’s intensifying crackdown on crypto entities. However, this recent legal face-off reflects the overall global trend toward a stricter regulatory approach to cryptocurrencies.
The SEC will likely sue Crypto .com
— Crypto Tea (@CryptoTea_) June 8, 2023
they sued Coinbase and Binance for selling securities
specifically naming Solana, Cardano, Sandbox, Matic, CHZ, BNB, Mana, Algo and more
crypto .com also sells ALL of these cryptos
plus they launched their own CRO coin
plus they offer… pic.twitter.com/2nuqd5ljVY
The crypto world has seen SEC’s aggressive action before, notably in the FTX exchange and Coinbase case, setting a disconcerting precedent for crypto exchanges and investors alike.
Binance US prepares for major changes
In a surprising move, Binance US announced the suspension of US dollar deposits and alerted customers of an impending pause in fiat (USD) withdrawal channels.
The SEC has taken to using extremely aggressive and intimidating tactics in its pursuit of an ideological campaign against the American digital asset industry. https://t.co/AZwoBOgsqS and our business partners have not been spared in the use of these tactics, which has created… pic.twitter.com/rlIe6swIoY
— Binance.US 🇺🇸 (@BinanceUS) June 9, 2023
A decision triggered by the SEC’s aggressive tactics, these modifications are set to transform Binance US into a crypto-only exchange.
Such a shift might send further shockwaves through the market, altering dynamics and challenging the resilience of Binance’s customer base.
The road ahead
As Binance US reinvents itself amidst the storm, the rest of the crypto world watches keenly. This saga underscores the need for a more evolved and adaptive regulatory framework in cryptocurrencies.
Ultimately, the course Binance US navigates will significantly impact the crypto industry’s future landscape.
Read more: Ripple losing SEC case can affect Coinbase and Binance, lawyer says