No concrete evidence of “Binance investigation”, but short-side sentiment is in a frenzy

The investigation of Binance is not solid, but it reflects the fragile sentiment of the market.

According to Bloomberg, Binance, the world’s leading crypto exchange, is facing an investigation by the U.S. Department of Justice and the IRS. Officials investigating money laundering and tax violations have sought information from individuals with in-depth knowledge of Binance’s business, people familiar with the matter said. The investigation is being conducted confidentially. But the Bloomberg article also mentions that the current regulatory action against Binance is an investigation that does not involve allegations of wrongdoing, and that does not mean that Binance has engaged in any wrongdoing.

BNB fell 11.29% on the news that Binance was being investigated. The market was once in a panic mood, and BTC was affected by this and fell again, to as low as around $47,000. However, after all, there was no “real” evidence of any misconduct by Binance in the report, and the market slowly started to rebound.


The Bloomberg report was quickly followed up by the Wall Street Journal (WSJ), Reuters (Reuters) and other heavyweight media, and the market influence quickly expanded.

In the face of market questions, Binance responded quickly.

First, Zhao Changpeng tweeted, “The headline is a bit scary, but the content of the article is not as bad as it seems. Binance is actively cooperating with law enforcement to crack down on the perpetrators, but it seems the negative impact has already happened”.

No concrete evidence of "Binance investigation", but short-side sentiment is in a frenzy

And Binance officials also said Binance is cooperating with the authorities to actively investigate, while stating that Binance has been building a compliance system with anti-money laundering principles and monitoring suspicious activities in a timely manner.

No concrete evidence of "Binance investigation", but short-side sentiment is in a frenzy

A 2019 report

In the Bloomberg report, a research report by crypto data analysis company Chainalysis on crypto exchanges and money laundering transactions was mentioned, and this report became a side basis for suspecting Binance of illegal activities such as money laundering and tax evasion.

In January 2020, Chainalysis released a research report on cryptocurrencies and money laundering, which mentioned crypto exchanges as an important exit channel for cryptocurrencies involved in money laundering. In 2019 the company monitored approximately $2.8 billion worth of BTC allegedly transferred from criminal groups to exchanges, and approximately 27% of that, or more than $700 million, went to Binance exchanges.

Coin World – [Hot Topics] “Binance Investigated” No Solid Hammer for Now, Short Sentiment is in the Air

No concrete evidence of "Binance investigation", but short-side sentiment is in a frenzy

The chart above shows the data shown in the original report. As an emerging field, cryptocurrencies have indeed been closely associated with illegal and criminal activities such as money laundering and tax evasion, but with the gradual advancement of relevant regulatory policies in various countries in recent years, the efforts of exchanges regarding compliance and monitoring of suspicious funds have been strengthened. We cannot explore how the company’s algorithm in monitoring cryptocurrency transfer transactions, but it seems not rigorous to use the data from 2019 to show that there are current illegal acts such as money laundering and tax evasion in Binance.

Moreover, due to U.S. regulatory policies on cryptocurrencies, Binance shut down its U.S. operations in the summer of 2019 and established the Binance US (Binance USA) exchange, which is fully compliant with U.S. regulatory policies, in the fall of 2019 to serve U.S. users. Currently, Binance and Binance US are two completely separate operating entities. binance US only serves crypto trading for citizens of 12 US states, including New York, Texas and Florida. There is also no distinction made in the report between the two operating entities of Binance, and there is a great deal of ambiguity in the findings.

Similar Investigations

As the influence of cryptocurrencies has gradually expanded globally in recent years, including the entry of many large multinational companies into the cryptocurrency space since 2020, the regulatory policies and strength of the U.S. with respect to cryptocurrencies have been gradually strengthened.

Last October, Bitmex, the world’s largest crypto derivatives exchange, was charged by the CFTC with violating anti-money laundering procedures, and the three founders were accused of violating the Bank Secrecy Act and knowingly failing to establish, implement and maintain an adequate anti-money laundering program. The case is currently pending.

In March of this year the CFTC also launched an investigation into Binance for directing U.S. users to purchase crypto derivatives. According to U.S. regulatory policy, financial derivatives that are not registered with the CFTC cannot be sold to U.S. users. Of course, the final results of the inspection did not show any violations in Binance’s business.

And even the Coinbase exchange, which is already listed, is constantly facing inquiries from regulators. As previously reported by Coinworld, Coinbase received a total of 2,313 requests for enforcement information from government agencies in the second half of 2020.

Market Impact

As one of the several most influential exchanges in the crypto market, the news of Binance’s investigation had a negative impact on the market. At one point, BTC fell 6.5% while the news was announced. Shares of Coinbase, which is also a major crypto exchange, were also negatively affected yesterday, closing down 6.53% for the day.

Although the Bloomberg report did not seem to say anything really “hard”, and the market started to rebound after a short dip. Still, this event reflects the current short-side sentiment in the market.

As Musk announced yesterday that he would suspend accepting BTC payments and V-God started selling SHIB, the overly optimistic speculative sentiment of the previous few days was hit with a blow to the head and short sentiment began to take over. Especially after the overall plunge of the crypto market in yesterday’s morning session, the market sentiment is still relatively fragile, and at this time, whenever some negative news appears, it is easy to form panic selling sell-offs.

From a medium-term perspective, the logic of the bull market in the crypto market originated from the entry of institutions, but BTC has been oscillating between 50-60,000 for nearly 3 months, and we have not heard any news about large institutional buying of BTC for a long time. This may reflect an attitude of large institutions to the current reasonable valuation of BTC.

From a technical point of view, the rally since mid-April after BTC’s retreat is gradually becoming weaker, and yesterday hit a new low, and a downtrend is forming on the 4 hours. Without a sudden positive appearance, the inertia of the trend will still suppress the rebound space of BTC in the short term, and even if the price can rebound back above 54,000, the short sentiment may still suppress the price to probe back again.

In the long term, we believe the crypto market has entered the fast lane of development, and both the price and the industry will see continuous upward development. In the short term, the Binance investigation is just a reflection of the short mood in the market, but in the long term, it is a necessary path for the crypto market to become compliant and prosperous.

Posted by:CoinYuppie,Reprinted with attribution to:
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