Bitcoin has fallen below the $8,500 mark, merely 24 hours after surpassing $9,000. The entire cryptocurrency market has dropped $25 billion, and analysts suspect that the abrupt market decline was fueled by FUD (fear, uncertainty, doubt) surrounding Binance.
Earlier this week, Japanese mainstream media outlet Nikkei reported that Binance was warned by the Japanese Financial Services Agency (FSA) for serving local investors on its platform. Binance, the world’s largest cryptocurrency-only exchange, operates internationally serving millions of users in different regions. Hence, it is obvious that users in Japan could trade on the Binance trading platform, as they can trade on Upbit, Bittrex, Poloniex, or any other cryptocurrency-only exchanges.
However, Nikkei reported that criminal charges will be filed against Binance if the exchange “fails to halt Japan operations,” and the misrepresentation of the situation led the market to panic. Changpeng Zhao, the CEO at Binance, released a statement to reassure its users and investors that the report of Nikkei was irresponsible, and that the Binance team has been communicating with the FSA for awhile.
“Nikkei showed irresponsible journalism. We are in constructive dialogs with Japan FSA, and have not received any mandates. It does not make sense for JFSA to tell a newspaper before telling us, while we have an active dialog going on with them,” wrote CZ. “No need to worry. Some negative news often turn out to be positive in the long term. Chinese have a proverb for this. New (often better) opportunities always emerge during times of change.”
Almost immediately after the Binance situation was made public, the market dropped $25 billion. But, while the Binance FUD may have contributed to the decline of the cryptocurrency market, it also could have been coincidence, as it is not realistic to claim that an exchange’s compliance with one region led the market to decline by around 10 percent overnight.
Throughout the past few weeks, the cryptocurrency market has demonstrated a similar pattern in that the market has declined 10 to 15 percent, recovered from the correction, and drop again by 5 to 10 percent. It is more likely that whales in the cryptocurrency market are manipulating the price of cryptocurrencies, especially those with weak volumes, than a single exchange in Binance causing the market to fall.
The Binance situation can also be considered as a positive movement for the company, given that this will provide opportunity for Binance to operate legitimately, as a regulated financial service provider within Japan, to serve the second largest cryptocurrency exchange market in Japan.
If Binance was the sole cause of the recent correction, the market should have bounced back immediately after Binance CEO CZ and the company issued statements to clear the FUD. However, the market has stayed in the same position over the past 12 hours, and bitcoin still hovering around $8,500.
As bitcoin and other major cryptocurrencies did last week, once volumes begin to pick up on large exchanges, the cryptocurrency market will likely be able to recover to its previous level.
Featured image from Shutterstock.
Last modified: May 20, 2020 8:57 PM UTC