On May 13, 2022, two US Government departments announced that they were actively looking into the conduct of the world’s largest cryptocurrency exchange, Binance.
The IRS and DoJ believe that Binance, while headquartered in the Cayman Islands, has not complied with American tax and money laundering laws.
How did the announcement affect Binance Coin?
Since the investigations were made public, the price of the exchange’s intra-platform coin, Binance coin (BNB/USD), has fallen more than 50%, from $665 to $310. At the time of writing, BNB is trading at ~$340.
Although, importantly, the drop in the coin’s price seems detached from the investigation matter. By the end of May 14, BNB was trading at US$605, only down by 9%. To me, this indicates that the market shrugged off the announcement. Indeed, it is not uncommon for BNB to move by 10%, even on days with no news concerning the Company or the crypto space in general.
Rather, this massive price dip is ascribed to other factors that occurred last week. The major sell-off didn’t truly begin until May 19, when news that China was to further crackdown on the crypto industry. Strangely, the ‘crackdown’ was not much more than the Government reiterating its position on digital assets. Regardless, the market capitalization of the cryptocurrency fell by 25.8% in the span of three days, affecting BNB in the process.
Musk has too much influence over the crypto sphere
Another big piece of Crypto news hit the market on May 13. That being, Tesla’s (and Elon Musk’s) announcement that it will no longer accept Bitcoin (BTC/USD) as payment for its vehicles. The EV manufacturer’s justification for the U-turn on Bitcoin was that it was not eco-friendly. This announcement produced a 10% drop in the price of Bitcoin by the end of May 14. A few coins, such as Cardano (ADA/USD), received the news positively. Investors speculated this digital asset would replace Bitcoin on Tesla’s book and subsequently pushed the price up 40% over the proceeding days.
Perhaps there is something to the idea that Musk holds too much power over the crypto sphere. If this is true, it should be a warning to cryptocurrency investors. Perhaps stronger reservations should be held about investing in crypto, and Bitcoin in particular, until it decouples from Musk’s influence. Can we have faith in decentralized assets easily swayed by the online musings of a celebrity Billionaire or the disapproval of his overpriced Company?
