The Bitcoin (BTC) market experienced a jolt due to two primary reasons. First, the statement of Binance CEO Changpeng “CZ” Zhao, which implied that the exchange’s affiliates may have carried out wash trading in the past, peaked during Binance.US’ inauguration in 2019. Second, the promising, stirring “bullish tailwind” reportedly lost its momentum when China’s official intimation lacked assurance of economic stimuli.
The Wall Street Journal reported an internal communication of Zhao suggesting that $70,000 worth of BTC trading on Binance.US upon its launch could be them trading with themselves—a practice known as ‘wash trading’. This practice gives a false impression of volume and liquidity, and a pandemic for regulators worldwide. Despite Binance spokesperson refuting these allegations vigorously, the key fact remains that Binance, the world’s largest cryptocurrency exchange by trading volumes, is under an unexpected cloud of regulatory uncertainty.
Regulatory authorities have long been combating this malpractice, with the U.S. having banned wash trading in traditional markets way back in 1936. The latest in this combat is from the U.S Securities and Exchange Commission (SEC) filing a comprehensive lawsuit against Binance, accusing it of security law violations and manipulation of volume through Sigma Chain, another entity under CZ.
While the turmoil in the cryptocurrency exchange is one side of the coin, the other side has issued a warning of its own. The Communist Party of China’s 24-member Politburo, its supreme decision-making body, led by President Xi Jinping, stated that the nation’s economic recovery road is anticipated to be arduous.
Early in the year, reports suggested that China’s economic bounce-back post-pandemic was a significant driving force for risk assets, including BTC. However, the recent note posted by Xinhua News Agency carried an unsettling vibe, as no indications of strong monetary or fiscal stimuluses were provided. With China currently battling issues such as weak consumer spending, deepening deflation in factory-gate prices, and housing and real estate problems, the absence of strong stimuluses likely caused the BTC prices to stumble.
In conclusion, while the world’s leading cryptocurrency stumbles due to regulatory uncertainties and challenging economic recovery, believers and skeptics alike will continue to watch the market developments with bated breath.
Source: Coindesk
