Trigger For Bitcoin, Crypto Sell-Off?

Yesterday, November 21, Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao (CZ) consented to a $4.3 billion settlement with the US Department of Justice. This decision follows charges of money laundering, unlicensed money transmitting, and US sanctions violations. As part of the settlement, Binance will pay $4.3 billion, while CZ personally agreed to a $50 million fine, as Bitcoinist reported.

Massive Bitcoin And Crypto Sell-Off Incoming?

Following the news, the crypto community buzzed with a flurry of speculations and insights. Matrixport, a prominent digital asset platform, noted that before the settlement, on-chain data indicated Binance had moved a substantial $3.9 billion in USDT across its various wallets.

Mike Alfred, a vocal critic of Binance and CEO of Digital Assets Data Inc posited that the fine could result in the partial liquidation of Binance’s Bitcoin and crypto holdings. He believes that Operation Choke Point 2.0 was designed to get the big players like BlackRock their fair share of the market.

“By securing CZ’s plea agreement and $4.3B fine, the US Government is facilitating the transfer of Bitcoin from weak hands to strong. CZ and Binance will sell BTC to pay the fine while simultaneously the spot ETFs will soak up the supply with American capital. Beautiful execution,” remarked Alfred.

During yesterday’s plunge in Bitcoin’s price, Jack Niewold, founder of Crypto Pragmatist, took a similar stance, suggesting, “Looks like the Binance cartel is liquidating their customers’ assets to pay CZ’s little four billion dollar fine.” However, these claims lack solid backing.

Data Points To Strong Financial Position Of Binance

Conor Grogan, director at Coinbase, contradicted these claims with a detailed analysis of Binance’s financial capacity to pay the fine. He stated, “I backed out Binance Corporate’s crypto holdings from their Proof of Reserves: $6.35B total assets, $3.19B in stablecoins. Doesn’t include off-chain cash balances or funds held in wallets not in Proof of Reserves. Most likely able to pay full $4.3B DoJ fine with 0 crypto asset sales.”

Charles Edwards, founder of Capriole Investments, supported this view, pointing out Binance’s substantial revenues and profit margins, which indicate the exchange’s ability to afford the fine. He stated, “If Fortune is correct, Binance’s revenues over the last three years are circa $30B with a very wide profit margin in the order of 30%+. They should be able to afford to pay this fine a few times over.”

However, Adam Cochran of CEHV casts doubt on these assertions, questioning the credibility of Binance’s self-reported Proof of Reserves amidst CZ’s legal troubles. “Seems weird to take their self-reported PoR at face value when the CEO is in cuffs for money laundering though… we actually don’t know which assets are users vs corporate.”

Dylan LeClair, a Bitcoin analyst, added to this conversation, emphasizing the need to accurately state off-chain liabilities in the Proof of Reserves. But he acknowledged, “If the PoR correctly states off-chain liabilities owed to customers, yes.”

Ultimately, any fear-mongering by some crypto analysts predicting that Bitcoin will “crash to $20,000″ due to selling pressure from Binance seems simply wrong. The data shows that Binance has strong financial reserves.

In this sense, Edwards reflected on the broader market implications, noting, “All crypto fear, uncertainty, and doubt (FUD) has just been liquidated. When the market finds a bottom on this Binance news, all sources of FUD from the last two years will have been eliminated. […] We will be able to finally put the Binance FUD to bed.”

At press time, the Bitcoin price stood at $36,589, showing early signs of recovery after yesterday’s shock news.

Featured image from Shutterstock, chart from TradingView.com