Crypto shorts got it wrong on Binance

While the crypto market saw a spike in volatility on 21 November after the Binance settlement was announced, it was no way near the FTX crisis, when crypto’s market capitalisation dropped by roughly $200bn in one month.

Crypto’s market cap, since 21 November, before Changpeng Zhao’s resignation and Binance’s settlement, is up by roughly $30bn, according to data from Coinmarketcap.com.

Short-sellers, who started loading multi-million-dollar bets against the crypto market, lost roughly $90m between 22 November and 24 November, according to data published by crypto analytics platform Coinglass.

During the FTX crisis in November 2022, long crypto traders lost over $700m within 24 hours, CoinDeskreported.

What was different this time around?

Firstly, the FTX collapse laid bare billions of dollars in missing funds. Binance, conversely, faced charges that it was operating unregistered exchanges and violating US anti-money-laundering rules.

Secondly, FTX saw monumental withdrawal requests during the crisis in November 2022 totalling $6bn within three days. Due to its lack of liquid assets, it had no choice but to freeze withdrawals. Binance, on the other hand, saw outflows of roughly $1bn within 24 hours after agreeing its settlement with the Securities and Exchange Commission, out of total assets of over $68bn, DefiLlama data shows.

Slava Demchuk, the co-founder of crypto compliance firm AMLBot, said that the Binance settlement will not harm the sentiment across the market.

“Crypto firms will survive because there were no financial losses to any third parties and clients. This case has shown no impact on the cryptocurrency markets, with bitcoin at its highest level since May 2022,” Demchuk said.

Dina White, general counsel at Zodia Markets, said that action by authorities in the US represents a “gradual movement towards the development of a regulatory framework”.

“Regulatory actions generally mean that problematic areas within the industry are being addressed,” White told Financial News.

Meet the new boss

Binance’s new chief executive Richard Teng happens to have a strong regulatory background. Teng, who took charge as the new boss of Binance on 21 November, was CEO of Abu Dhabi Global Market from March 2015 to March 2021.

He started his career at the Monetary Authority of Singapore as director of corporate finance in 1994 and later joined Singapore Exchange as chief regulatory officer in September 2007.

“Drawing on Richard Teng’s extensive regulatory background and experience, his new role in Binance represents an opportunity to move past mounting enforcement actions,” Rajeev Bamra, senior vice president and head of defi and digital asset strategy at Moody’s, said.

“To enhance transparency, Binance must prioritise and comply with stringent know-your-client procedures on both ends of the value chain within respective jurisdictions,” he added.

Can crypto mining be sustainable?

COP28 is fast approaching. With that comes another event where global leaders are planning to discuss the environmental impact of crypto mining. Thomas Mapes, founder of the first crypto mining lobby group, the Digital Energy Council, said that the crypto mining industry needs to have a “seat at the table” with policymakers to make it sustainable.

“At its core, COP is a negotiation between governments to develop energy policies. As the private sector increases involvement at COP, the mining industry can highlight partnerships for companies to get projects off the ground with non-traditional funding streams,” Mapes told FN.

In other news

Sam Bankman-Fried’s life behind bars: Crypto tips and paying with fish

Autumn Statement: The short-selling, venture capital, and crypto updates you may have missed

Watch back: FN takes the stage at the European Blockchain Convention

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To contact the author of this story with feedback or news, email Bilal Jafar