Yesterday, November 21, Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao (CZ), agreed to a $4.3 billion settlement with the United States Department of Justice. This decision follows accusations of money laundering, unlicensed money transmission and violations of US sanctions. As part of the settlement, Binance will pay $4.3 billion, while CZ personally agreed to a $50 million fine, as Bitcoinist reported.
Is a bitcoin and cryptocurrency sell-off coming?
Following the news, the crypto community was filled with an avalanche of speculation and ideas. Matrixport, a leading digital asset platform, bitcoin/spot-bitcoin-etf-odds-100-matrixport/” target=”_blank” rel=”noopener nofollow”>noted Prior to the deal, on-chain data indicated that Binance had moved a substantial $3.9 billion worth of USDT across its various wallets.
Mike Alfred, vocal Binance critic and CEO of Digital Assets Data Inc. postulate that the fine could result in the partial liquidation of Binance’s bitcoin and cryptocurrency holdings. He believes Operation Choke Point 2.0 was designed for big players like BlackRock to get their fair share of the market.
“By securing CZ’s plea deal and a $4.3 billion fine, the US government is making it easier to transfer bitcoin from weak hands to strong hands. CZ and Binance will sell btc to pay the fine, and at the same time, spot ETFs will absorb the US capital supply. Beautiful execution,” commented Alfred.
During yesterday’s drop in the price of bitcoin, Jack Niewold, founder of crypto Pragmatist, took a similar stance, suggesting: “It appears that the Binance cartel is liquidating its clients’ assets to pay the small fine of four billion CZ dollars.” However, these claims lack solid support.
Data Points to Strong Financial Position for Binance
Conor Grogan, CEO of Coinbase, contradicted these claims with a detailed analysis of Binance’s financial ability to pay the fine. He said: “I removed Binance Corporate’s cryptocurrency holdings from its Proof of Reserves: $6.35 billion in total assets, $3.19 billion in stablecoins. Does not include off-chain cash balances or funds held in wallets that are not in Proof of Reserves. Most likely you can pay a full $4.3 billion DOJ fine with 0 crypto asset sales.”
Charles Edwards, founder of Capriole Investments, supported This opinion, pointing to Binance’s substantial revenues and profit margins, which indicate the exchange’s ability to afford the fine. He stated: “If Fortune is right, Binance’s revenue over the last three years is around $30 billion with a very wide profit margin in the order of 30%+. “They should be able to afford to pay this fine multiple times.”
However, CEHV’s Adam Cochran casts doubt on these claims, questioning the credibility of Binance’s self-reported Proof of Reserves amid CZ’s legal troubles. “However, it seems strange to take their self-reported PoR at face value when the CEO is in handcuffs for money laundering…we don’t actually know which assets are user versus corporate.”
Dylan LeClair, bitcoin analyst, aggregate to this conversation, emphasizing the need to accurately indicate off-chain liabilities in the Proof of Reserves. But he acknowledged: “If the PoR correctly sets out the off-chain responsibilities owed to customers, yes.”
Ultimately, any scaremongering by some crypto analysts predicting bitcoin will “crash to $20,000” due to Binance selling pressure seems simply wrong. The data shows that Binance has strong financial reserves.
In this regard, Edwards reflected on the broader implications of the market, noting: “All the fear, uncertainty and doubt (FUD) of cryptocurrencies has just been put to rest. When the market finds a bottom with this Binance news, all sources of FUD from the last two years will have been eliminated. (…) We can finally put an end to Binance FUD.”
At press time, the price of bitcoin stood at $36,589, showing the first signs of recovery after yesterday’s shocking news.
Featured image from Shutterstock, chart from TradingView.com
