The end of the market or why we need an information war against Binance

Jokes are Over: Targeted Action Against Binance Shows Clear Intent to Get Cryptocurrencies. What can happen and what will be the consequences? The FTX bankruptcy and its consequences were not enough to discredit the cryptocurrency industry, despite a lot of apocalyptic forecasts. Within a month, the market recovered and even tried to chart an upward trend.. But the events of the last week show that the mysterious enemy is not going to stop there. It’s hard not to notice the start of a targeted campaign against Binance, the largest cryptocurrency market ecosystem.. Hundreds of billions of dollars are circulating in it every month, and the reserves of the exchange itself exceed the value of the assets of many corporations.. And yet, Binance has so far managed to stay in the gray area, giving at least retail customers the option to remain anonymous, and not leaking information to regulators.. Of course, this couldn't go on forever. Right moment to destroy cryptocurrencies The events of 2022 have already shown the collapse of many global market mechanisms. Even the illusion of a “free market” no longer exists, and international business is forced to maneuver between maintaining profits and complying with many sanctions and other restrictions. Asset lock-ups, trading restrictions and manual price adjustments are already commonplace. This level of confrontation at the global level has not existed since the Second World War. Geopolitical games have led to an increase in inflation around the world. And despite officials' optimism, central banks continue to raise rates and stock markets continue to decline.. This means that both governments and major market players do not hope for a quick recovery.. Until recently, cryptocurrencies could still be seen as a relatively “safe haven”. But this situation has ceased to suit those who are hiding behind the “invisible hand of the market.” The growth of the investment attractiveness of cryptocurrencies against the background of the depreciation of fiat money will cause the flow of large capitals into them, and it will become simply dangerous to touch them.. Now is the right time to eliminate or at least significantly weaken a too independent competitor for emerging government cryptocurrencies (CBDC). Public opinion has already been sufficiently prepared by the information campaign around the collapse of FTX and Terra, and a small push in the right direction is enough. This year, all markets are in unstable equilibrium, but cryptocurrency is the most vulnerable. It is the least regulated, and liquidity during the “crypto winter” has fallen many times over compared to last year. In addition, cryptocurrency traders are used to price spikes, scams, and project closures, which means it’s easier to unbalance them and make them panic. Three whales of the cryptocurrency market There are many large companies and decentralized projects with a capitalization of billions of dollars in the cryptocurrency industry. But the basis of its stability for investors is three large exchanges, part-time operators of the three largest stablecoins. It is they who provide the main “bridge” between crypto and fiat currencies, liquidity on decentralized exchanges and the possibility of direct work with cryptocurrencies for large players from traditional finance. It is easy to guess that we are talking about Bitfinex/Tether (USDT operator), Coinbase/Circle (USDC operator) and Binance (BUSD operator). In total, these three crypto-corporations hold more than $130 billion in stablecoins alone, and together with other own funds and customer deposits, they control up to a quarter of a trillion dollars.. This is almost 30% of the “paper” capitalization of the cryptocurrency market. But unlike virtual capitalization, which is derived from the value of all issued coins, all funds on exchanges are “live” money and other liquid assets. The collapse of any of these three whales will deal a powerful blow to the cryptocurrency industry, from which it will recover for many years.. It's not so much about direct losses, but about reputational damage.. Institutional investors – banks, investment and pension funds, large asset managers – will assign the highest risk ratings to cryptocurrencies and throw them out of investment portfolios. Bitcoin above $10,000 will once again be a cypherpunk dream, and for millions of bankrupt small players, cryptocurrencies will become synonymous with pyramid schemes and scams.. Recovering a destroyed reputation is much more difficult than earning it from scratch. Crushing any of the cryptocurrency whales is not as easy as bankrupting the “paper” FTX with artificial capitalization from its own tokens. Their fixed assets are in quite reliable “pods” placed in traditional financial assets that are not subject to sharp price fluctuations.. Therefore, in the absence of the possibility of a direct and rapid collapse, the tactic of loosening works well – first of all, by methods of information warfare, which cost almost nothing, but are often more effective than brute force.. This is exactly the kind of campaign that started against Binance. Why Binance is being attacked Why was Binance chosen as the victim? Of the three exchanges mentioned above, Bitfinex is legally the most vulnerable – it is an offshore company with a rather obscure past.. But after the 2016 hack, she became more of a niche player.. Its turnover and client base are smaller, there is practically no own ecosystem, and most of its own assets are in the provision of the USDT stablecoin (today $ 66 billion). Thus, it is more difficult to bankrupt it, and the information and political effect will be less. Coinbase, on the other hand, was initially positioned as a “white” exchange.. It is a public company focused on the American market.. It is registered with the SEC, trades on the US stock market, publishes full accounts, submits client data to the Internal Revenue Service and complies with all sanctions.. Thus, Coinbase will only benefit from the collapse of competitors and help regulators in increasing control over the cryptocurrency market. Binance is the perfect victim. It has the largest turnover, the largest community, and at the same time a lot of friction with regulators in different countries due to “gray” policies and partial refusal to comply with sanctions.. Therefore, the exchange has to sit on many chairs at once, a lot of rumors roam around it and it is much easier to find violations. Binance's reserves in backing BUSD are the smallest of the “big three” – now there are “only” $18 billion there. The gathering clouds could not be ignored. Binance has already done a lot to strengthen its position in the past.. The first logical step was the division of the market: the most risky American market from the point of view of regulation was separated into a separate company Binance.US, which operates with a number of restrictions, and access to clients from the USA and a number of other countries was closed on Binance Global. At the end of November, a similar maneuver was carried out in Japan. In addition, former regulators were hired and the legal division was significantly expanded.. However, other cryptocurrency projects have gone down this path, which even caused concern to US senators.. However, among the public figures in the state of Binance, losses began: on December 20, Joe Johnson, the brother of the former Prime Minister of Great Britain, left the exchange. In recent months, the exchange has sought to publicly prove its financial stability.. The international audit company Mazars conducted an external audit, and Binance itself developed a mechanism to prove the existence of cryptocurrency reserves – Proof-of-Reserves (PoR). But the technology has not yet been finalized and has not managed to gain the confidence of investors, and for regulators it will not have legal force in any case. At the end of November, Binance became the main initiator of the creation of the “recovery fund” of the industry and immediately transferred 1 billion BUSD to it.. And the final touch – yesterday Binance became a member of the US Chamber of Digital Commerce, lobbying for the interests of the cryptocurrency business. However, nothing is known about the real achievements of this organization. Information war against Binance The first direct action of the information campaign against Binance was a Reuters article, according to which the US Department of Justice has been investigating for several years. However, the ministry is “unable to decide” on specific charges against the exchange, which has long been trailed by a “many violations” of US law.. No formal charges have been filed against Binance, and the information comes from “anonymous sources in the Ministry of Justice.” In addition, on December 12, FTX founder Sam Bankman-Freed was arrested in the Bahamas.. He was not touched for more than a month, but the day after his arrest, he was already charged by the New York prosecutor's office with the support of the CFTC and SEC. Now the disgraced creator of the bankrupt exchange faces up to 115 years in prison. Very prompt work. There was no such precedent in the cryptocurrency industry after the conviction of the creator of Silk Road Ross Ulbricht, who is serving two and a half life sentences.. Even such an obvious fraudster as the founder of Onecoin, who stole about $4 billion, can “get off” with 60 years in prison. And the owner of MtGOX, Mark Karpeles, who served about three years in prison, has long been at large. Sam Bankman-Fried turned out to be really talented in terms of attracting investments, and many cryptocurrency companies and venture capital funds invested directly or indirectly in his exchange.. Therefore, the collapse of FTX, which did not cause critical losses, financially and psychologically affected almost everyone involved in cryptocurrencies.. Many old crypto skeptics woke up and, kicking the corpse of FTX, did not fail to once again call cryptocurrencies a fraud and predict their complete collapse.. In general, this created a negative background around the entire industry.. And the regulators got every reason to strengthen and deepen the “investigations”. The next day, December 13, followed by a strange restriction of transactions with the stablecoin USDC. The stablecoin is owned by Coinbase, a regulated American company and one of the main competitors of Binance.. Technically, the restriction was allegedly caused by “closed banks” in the US, although nothing of the sort has been observed so far.. It did not cause serious inconvenience to traders, but further strengthened the negative information background. The turnover in USDC on Binance is less than in other major stablecoins, and you can deposit and withdraw money in USDT or BUSD at no additional cost. Why did a huge number of USDC withdrawal requests suddenly appear so abruptly, and at the most inopportune moment for this? This restriction and its unexpected announcement made traders even more nervous and suspicious.. After all, the collapse of projects most often began with withdrawal restrictions for some instruments, and then their number gradually expanded. Panic has paid off. Immediately after this negative news, information appeared that Binance clients were actively withdrawing bitcoins, up to 30,000 BTC per day, and the next day, even more panic reports that the exchange was rapidly losing deposits in major cryptocurrencies and stablecoins. In just two days, up to $3 billion could be withdrawn from the exchange. By the end of the week, that figure is likely to have risen even more.. Fiat withdrawals may be comparable, but they cannot be traced as easily. At the same time, on December 14, the capitalization of the stablecoin BUSD fell sharply, immediately by $3 billion.. This is both a bad and a good sign.. On the one hand, Binance really faced a liquidity crisis and was forced to use its main “egg”. The good news is that the exchange works honestly and really withdraws unsecured tokens from circulation. And these funds are still enough, whereas a month earlier, a smaller panic completely ruined FTX. Further changes in BUSD capitalization may provide additional information about the state of affairs on Binance. Added fuel to the fire and the popular American TV presenter Kevin O'Leary, who was invited to speak in the US Congress on the FTX case. He accused Binance of unfair competition, “killing FTX” and trying to monopolize the market.. At the same time, O'Leary himself does not deny that he previously received $ 15 million from FTX for promoting the exchange in his show. The Phantom of the Audit But the most interesting part of the story played out with the audit of Binance reserves by the audit firm Mazars.. This is a fairly well-known accounting and auditing company headquartered in Paris, which has existed for almost 80 years.. While not one of the Big Four, she has enough experience in auditing, consulting and other business services to provide an authoritative opinion. After the conclusion of the agreement on December 1, Mazars audited Binance's reserves within a week, confirming that the exchange had 582,485 BTC, which was 1% more than client funds, and excluding the exchange's own reserves.. The conclusion of Mazars was received positively, despite some attacks by skeptics, by the way, previously involved in US regulatory bodies.. A few days later, on December 15, the independent analytical platform CryptoQuant confirmed the relevance of the Mazars report. And suddenly, on December 17, Mazars unexpectedly deleted the results of the Binance audit from its website without explanation and defiantly refused to cooperate with other cryptocurrency companies, including Crypto.com and KuCoin.. Such actions are difficult to explain, because Mazars first of all damaged its own reputation.. It is unlikely that this could have happened without strong external pressure, and it is unlikely that we will ever know what prompted the company's management to act inexplicably from a business and ethical point of view. On the same day, Binance said that it had approached representatives of the “big four” international accounting firms for an audit, but none of them wanted to cooperate. After all this, one should hardly be surprised at the nervous speech of Changpeng Zhao, in which he accuses Kevin O'Leary of outright lies, and the Big Four auditors of misunderstanding the operation of the cryptocurrency market.. Zhao is already beginning to realize that his exchange is being taken seriously, and he has few means to counter such powerful pressure. Binance has already lost billions in user deposits. In the near future, this will lead to a drop in turnover, and hence profits and influence.. Even if the exchange manages to survive, it will be very difficult for it to maintain its position as the largest player in the market. But the US regulators have not yet taken real action, only shaking their fingers through the press. Who benefits from the fall of Binance To understand what is happening, first of all, you need to determine who is most interested in the negative development of events. Considering that almost all verbal attacks on Binance take place in the USA, it can be assumed that the entire campaign is conceived in the circles of the American financial oligarchy, regardless of their party affiliation.. And some Democratic Party functionaries are directly interested in hushing up the FTX scandal or overshadowing it with something more significant.. Direct action in such cases is traditionally not taken, but leverage is widely used in the press and regulatory agencies. But the campaign against Binance is not an end in itself, but the most convenient means to weaken the position of cryptocurrencies in general.. Verbal attacks continue on the entire cryptocurrency industry. Democratic Senator and Banking Committee Chairman Sherrod Brown called for a total ban on cryptocurrencies as they “threaten US national security”. And current SEC Chairman Gary Gensler said that the cryptocurrency market should be transparent and regulated in a similar way to the securities market.. This means that crypto-currency companies will have to submit information about the deposits and transactions of their clients to the regulator, as well as periodically publish financial statements. There are also more modest interests. Of the three pillars of the cryptocurrency market, only Coinbase has been operating in the US from the very beginning and is very loyal to the requirements of regulators.. It no longer has equal rivals in the American and European markets. Now it has a chance to take the place of Binance and significantly strengthen its position in the international market as the most reliable regulated platform.. At the same time, continuing to report on the operations of clients to the right place. Consequences of the collapse of Binance for the market Perhaps the moment of truth, long predicted by crypto-anarchists, is approaching, when the confrontation between centralized and decentralized currencies will turn into an open conflict? And the attack on Binance is one of the first blows in this war? Binance, like any large project, has enough detractors. These are not only competitors and regulators, but also unsuccessful traders, creators of projects and tokens who failed to negotiate with the exchange, opponents of cryptocurrencies in general, BNB shortists and many other categories.. But most of these sensationalists do not think about the future and the fact that the collapse of Binance could hit them.. A sharp drop in cryptocurrencies will cause an unprecedented liquidity crisis so far. Even the most desperate shortists run the risk of being left with millions of paper profits, but without real money. As mentioned at the beginning of the article, Binance is one of the backbone players in the cryptocurrency industry.. The exchange owns both the stablecoin of the first three and one of the largest blockchains, on which hundreds of projects work. It is tied to the operations of many large companies in the industry and beyond. Therefore, the consequences of the collapse of Binance will greatly amplify the wave already set off by the Terra and FTX bankruptcies.. Moreover, an uncontrolled collapse of the entire cryptocurrency infrastructure built over the past ten years may begin. What happens if Binance declares bankruptcy? First and most obvious, all assets of Binance clients will be frozen indefinitely, even if there are enough of them on the day of the announcement to fully cover the payments.. And that's tens of billions of dollars.. But the very next day they can cost several times less.. After all, a cryptocurrency exchange holds most of its assets in cryptocurrencies and tokens, and their collapse is inevitable. BUSD liquidity will immediately drop to zero, even if they are fully collateralized, and the assets themselves will most likely also be frozen until the end of the process.. Its duration can be judged by the MtGOX case, which has dragged on for almost nine years.. The lack of liquidity will cover most centralized and decentralized exchanges, many of them will be forced to limit withdrawals, which will only spur panic. The price of BNB and the vast majority of tokens on BNB Chain will collapse in a matter of hours. And then the fall will inevitably captivate the entire market. The total drawdown will be many times stronger than after the FTX bankruptcy. Traders will rush to sell cryptocurrencies and withdraw money from all exchanges, many of them will not survive such a storm. Commissions will also skyrocket on decentralized exchanges, especially those powered by BNB Chain. Algorithmic stablecoins will lose stability. A chain of bankruptcies can lead to a domino effect and destroy even reliable projects that store funds in BTC, ETH and stablecoins. Mining will become unprofitable for a long time, and stakers will have to write off “paper” losses or sell coins at low prices. Cryptocurrency projects in traditional markets will suffer even more damage.. Shares of many cryptocurrency companies and funds are already trading at a significant discount, a new wave of sales may force their operators to liquidate and leave traditional exchanges. Only Grayscale Shareholders Will Lose Billions. Cryptocurrency futures contracts and ETFs on the CME and other stock and commodity exchanges will collapse. It is quite possible that operators will refuse to extend and open new contracts. Thus, the cryptocurrency industry will be thrown back into 2016. Inevitable and political consequences. Thousands of complaints from “offended” investors will pour in, general inspections of all companies involved in cryptocurrencies in any way will begin. And at least some of them will inevitably reveal that not everything is in order. This means a new wave of public processes, fines, bankruptcies and a new drop in cryptocurrency rates. After such a complete proof of insolvency, the regulators will have a completely free hand. Cryptocurrency companies will be even more regulated, and all transactions with cryptocurrencies will be tightly controlled. Thus, against their background, state digital currencies will seem like a more reliable, faster and safer tool. Perhaps this is the strategic goal of the entire campaign against cryptocurrencies? But before all this has happened yet, every cryptocurrency investor should consider whether they need to help rock the boat with their own hands.