What factors are contributing to the decline in the cryptocurrency market today?
The cryptocurrency market is experiencing a downturn today amid reports that the U.S. Department of Justice is poised to unveil enforcement actions against Binance and Changpeng Zhao.
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The cryptocurrency market is currently in decline as Bitcoin, down to $36,428, Ether at $1,985, and various altcoins are affected by the anticipation of upcoming regulatory enforcement actions. The U.S. Department of Justice (DOJ) is set to make a significant announcement on November 21, reportedly confirming enforcement actions against Binance, accompanied by a hefty $4.3 billion fine.
Cryptocurrency market performance, 1-day chart. Source: Coin360
Market sentiment is being heavily influenced by the regulatory pressure faced by the cryptocurrency industry, particularly from U.S. authorities. Recent events, such as the SEC filing civil lawsuits against major exchanges like Binance and Coinbase on June 5 and 6, 2023, have intensified the industry-regulator discord. The SEC alleges that 61 cryptocurrencies, totaling $100 billion in value, are securities.
Reports on November 21 suggest that the DOJ will impose a $4.3 billion fine on Binance, and Changpeng Zhao, Binance's CEO, plans to plead guilty to violating U.S. Anti-Money Laundering requirements, leading to his resignation. Such regulatory uncertainties and actions against prominent players in the crypto sector contribute to the downward trend in cryptocurrency prices.
The delay of the potential approval of a spot Bitcoin exchange-traded fund (ETF) by the SEC, originally anticipated in November, has also dampened market sentiment. The SEC postponed decisions on various ETF applications, including Grayscale's Ether futures ETF and applications from Hashdex, Global X, and Franklin Templeton. This delay, coupled with the SEC's cautious approach, has prompted traders to secure profits in the face of potential prolonged uncertainty.
Bitcoin historical returns by month. Source: Newhedge
Additionally, the cryptocurrency market has witnessed significant liquidations in the derivatives market, with over $148.7 million in long positions liquidated in the past 24 hours. This rush of liquidations, combined with the absence of buying pressure from trading volume, has further contributed to the market's negative performance.
Crypto market liquidations. Source: Coinglass
In the short term, the cryptocurrency market is navigating through a complex landscape of economic and regulatory challenges, with the outcome shaped by a dynamic interplay of various factors.
