Making a strong echo of the Celsius scandal, the day before, Binance had to suspend bitcoin payouts for its customers, Monday, June 13, 2022 And of course, the first cryptocurrency exchange platform has its share of responsibility. But unlike hasty conclusions far, Binance’s adventures do not reflect irresponsible decision-making by its leader Changpeng Zhao. Nor betrayal.
In a slow market and while yesterday a billion positions were liquidated on the crypto market, Bitcoin is doing poorly. Blockchain was not ready for such a volume of transactions and the crypto dinosaur is struggling to keep up. For all the small transactions recorded, when the drop in fees motivated investors to sell their steadily falling bitcoins, The Bitcoin network lost control and Binance had to make a decision.
Binance in trouble
The influx of new investors driven by their emotions into Bitcoin over two years has radically weakened the network in the event of panic in the markets. As the head and founder of FTX, Sam Bankman-Fried, explained last May, bitcoin is not intended to become a means of payment, but a reserve currency. And while many investors are driven by profits and react to the slightest wind of panic, the price of Bitcoin is going through a snowball effect that can lead to the current situation.
Binance failed to meet one of Bitcoin’s biggest limitations: its slowness. Down 50% since March 30, to $22,315 on Tuesday, bitcoin has never been this low since December 2020. With its millions of users, Binance is also one of the biggest culprits for the very (too) rapid increase in transaction volume and thus crypto price volatility. Attracting young, profit-driven investors, Binance found itself in much the same situation as Robinhood, when GameStop stock exploded in January 2021.
Having become responsible for these failures, offering investment tools and very attractive communication for investment products, Binance is currently paying the price as a new class action lawsuit was filed yesterday, shortly after the suspension of Bitcoin payouts. Affected users mention that Binance allegedly did not play a transparent role in the Terra blockchain by representing its stablecoin TerraUSD as stable when it was not.
“Binance US carelessly listed and promoted UST as a safe stablecoin for those who want to avoid the volatility of other cryptocurrencies”it is stated in the press release of the law firm that filed the lawsuit. “They, along with other exchanges that listed UST, should be held accountable.” With Bitcoin, the problems are less, but Binance as well as other successful cryptocurrency buying platforms have done this from the initial use of blockchain new casino.
A counterexample to the stock market
However, bitcoin and crypto exchanges are not the only ones making such stops. The stock exchange authorities and brokerage houses have always shown us that they also have to execute suspensions when markets are uncorrelated too strong and that panic gripped the spirits (it is also necessary to cite technical failures). And many times the headlines have lost astronomical amounts leaving their investors on the carpet, like on the cryptocurrency side.
The new affair around Binance is therefore not exceptional, and this kind of accident, which can happen in less serious moments, generally does not cause so much criticism. Binance may have a lot of trouble re-raising Bitcoin, alternatives by exchanging its tokens are always available and the concern is not of the same order as Celsius, who had to be able “to meet its long-term withdrawal obligations”. To avoid these problems, it’s best to still hold your cryptocurrencies yourself, like in a physical wallet.
Phases of a bear market
For Jason Yanowitz, Co-Founder of American Crypto Media Blockadeit would be ideal to get out of “the second phase of the bear market”. The English term, denoting the stages in which a digital asset evolves downward over significant periods, would be in its second phase according to him, of a total of three phases.
He translated this into an investor’s state of mind where excitement is replaced by anger and where the more prices fall, the more noise these falls make and motivate investors to sell more and more. “This is where it gets ugly”, he wrote. For him it would be the first stage of panic – before that, during phase 1, investors prefer to think that prices are just returning to realistic levels. During this time we are not talking about current topics, “people keep building”he commented.
The last phase, which will also be the longest, will come after “Maximum pain will lead to maximum exhaustion”. This will be the phase during which “no rebound. […] Where anger is replaced by silence”. Consolidation will be very strong for him and “many talents will leave and companies will close”. As advice for the return of the good old days, Jason Yanowitz advised: “during bear markets, it’s crucial to remember why you build and re-read the classics”. A way, perhaps, to learn from the past.