The price of Bitcoin has seen a significant decline, with the largest cryptocurrency in the market dropping 8% over the past month. This downturn has led to considerable criticism on social media, particularly aimed at the crypto exchange Binance, which some investors blame for exacerbating the current market downturn.
Is Binance Responsible for the Bitcoin Price Drop?
Market analyst DeFitracer shared thoughts on social media platform X (formerly Twitter), raising questions about why the market is undergoing a sell-off despite what he considers an abundance of positive factors.
These positive indicators include record investments into crypto exchange-traded funds (ETFs) and expected interest rate reductions by the Federal Reserve (Fed) anticipated for next month. Yet, as he notes, “we’re still experiencing a downturn—why?”
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According to DeFitracer, the ongoing sell-offs seem to be coordinated by Binance, which he claims is employing a third party, market maker Wintermute, to carry out its trades.
He argues that this strategy aims to create a bearish sentiment that retail investors follow, ultimately benefiting Binance through profits from futures liquidations. Indeed, in 2024, $344 million was liquidated in a single day on the exchange, and current market tactics could produce similar outcomes, he asserts.
As of the latest update, Bitcoin trades at $108,295, marking a 12% decline from its all-time high (ATH) of $124,000 reached earlier this month.
Three-Phase Response to Crypto Sell-Off
DeFitracer also pointed out notable activity concerning Solana (SOL). The analyst suggests that in addition to Bitcoin, Binance has been liquidating SOL, possibly motivated by a desire to limit competition with its own token, Binance Coin (BNB), which currently boasts a market cap of $117 billion compared to SOL’s $102 billion.
He further stated that this activity raises concerns about how Binance is acquiring its Solana, as their proof-of-reserves only account for client funds, implying potential risks to customer assets during these trading activities.
DeFitracer remarked that these moves are reminiscent of the actions taken by failed exchanges like FTX, which similarly utilized client funds through its trading wing, Alameda Research:
This is a troubling situation for the exchange. User funds should be protected – not manipulated for market strategies. FTX employed the same tactics with client funds via Alameda Research. We all recognize how that ended.
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While current market conditions may seem discouraging, DeFitracer outlines a potential three-phase market response: an initial phase of panic leading to retail exits, followed by accumulation during the downturn, and ultimately, a sharp recovery.
He highlights that the anticipated interest rate cuts by the US Federal Reserve next month could significantly impact market sentiment, recalling how similar cuts in 2021 spurred a massive bull run, driving Bitcoin prices to unprecedented levels.
Featured image from DALL-E, chart from TradingView.com
