Binance and Coinbase Shock: Billions of USD fled from the virtual currency exchange
Many investors have begun to fear and lose confidence in the cryptocurrency market after successive lawsuits against Binance and Coinbase.
On June 5, the US Securities and Exchange Commission (SEC) sued Binance and CEO Changpeng Zhao for 13 charges, including “operating a fraudulent website” and “calculated circumvention”. Binance is also accused of violating investor protection regulations such as inflating trading volumes, manipulating customer cash flows, or selling unregistered securities.
Binance’s lawsuit has not yet “cooled” before it is Coinbase’s turn to be “named”. On June 6 (US time), Coinbase was sued by the SEC for “failing to register as a stock exchange, thereby posing many risks to investors”.
Two consecutive lawsuits by the world’s two largest cryptocurrency exchanges sent the crypto market reeling. Most tokens dropped in value and investors started fleeing from Binance and Coinbase.
According to Nansen, after the announcement of the lawsuit, there was a net withdrawal of USD 231 million from the Binance exchange in just 1 hour. The total amount withdrawn from Binance in the past 7 days is $6.4 billion, including $1.4 billion in the first 24 hours alone. Binance’s 7-day net withdrawal rate has reached more than 1.6 billion USD – the highest level of this exchange since March 2023.
Coinbase has also been hit hard. In the past 7 days, Coinbase saw a high net withdrawal rate of nearly $600 million. Not to mention, the version exclusively for institutional investors – Coinbase Study has a net withdrawal rate of over $1.3 billion in 7 days, almost on par with Binance. An exodus from Binance and Coinbase in particular and the crypto market in general has begun again.
It is not until now that investors have lost faith in the cryptocurrency market. The collapse of a series of names such as TerraUSD, FTX, etc. in 2022 has caused investors’ optimism to gradually dissipate. Retail investors are the first to be negatively impacted after the cryptocurrency crises.
“Retail investors have flocked to cryptocurrencies in hopes of a quick return, despite risk warnings from experts and regulators,” Reuters reported. But after the turmoil in the market, online forums are now flooded with their own sad stories.”
“I felt like I was trapped in a whirlpool of death. My entire investment disappeared after 15 minutes,” said Tejan Shrivastava, a Mumbai-based crypto investor, revealing his shock after the Luna crash. Many retail investors are so frustrated with cryptocurrencies that they vow never to invest in it again.
“I couldn’t understand that I was so passionate about and invested in this damn thing. It took everything from me,” a 25-year-old Nigerian investor told Reuters.
Not only investors but even many financial professionals are not interested in cryptocurrencies anymore.
“Confidence in crypto is somewhat shaken,” said Yat Siu, co-founder of Animoca Brands fund after FTX collapsed.
CNBC financial investment expert Jim Cramer advises investors to get out of the electronic market while they can. According to him, electronic exchanges are like drugs and “if you keep pouring money into it, you are just an idiot”.
Alex Au, founder of Alphalex Capital, a Hong Kong-based asset management company, said: “Now is not the virtual currency winter anymore, it has turned to the virtual currency ice age. The crypto market will continue to weaken in 2023, as confidence among market participants is fading.”
The lack of confidence among investors could create another runaway from the crypto market in the future. The crypto game will still go on, but those remaining on crypto exchanges need to prepare well, even for the worst-case scenario.