Crypto news: Bitcoin is waiting for US inflation. Binance deepens negative sentiment

The cryptocurrency market has once again come under pressure in the face of growing controversy over an accounting report by Mazars, a firm employed by the largest cryptocurrency exchange Binance. In addition, bitcoin and other risky assets may face increased volatility today due to the release of US inflation data, which will be announced at 2:30 p.m. A faster-than-expected drop in inflation could help the bulls. On the other hand, the lack of a comparable rate of decline to the previous reading may raise concerns around restrictive Fed action next year.

The Mazars report did not have the effect expected by Binance and did not reassure investors. In addition, Reuters reported on an investigation by the U.S. Department of Justice into violations of U.S. sanctions and poor quality procedures at Binance:

• The service provided to the Binance exchange by Mazars, contrary to the original communication from the CEO, Chanpeng Zhao, and the exchange itself, was not an audit;
• The Mazars report failed to reassure investors because it revealed nothing about Binance's actual financial condition, about its liabilities and other assets besides Bitcoin which represents a fraction of its total portfolio;
• According to correspondence between Mazars and Binance, the report prepared by the accounting firm does not address the effectiveness of the company's internal controls over financial reporting. Mazars indicated that it "does not express an opinion or provide assurance" - cannot vouch for the figures provided in the report, which implies that it received them from Binance;
• Investors wonder for what purpose Binance created the SAFU fund for extreme circumstances if the exchange's assets are covered 1:1 to investors;
• According to CZ, the value of the SAFU fund is about $1 billion although it is variable because its portfolio depends on the accumulated reserves of Bitcoin, Binancecoin and the Binance USD stablecoin (BUSD) exchange rate;
• Prior to the 'proof of BTC reserves' procedure , Binance moved $2.7 billion in USDT (Tether) currency from its own portfolios although CZ itself commented after the FTX collapse that moving funds through exchanges before or after 'proof of reserve' should be a red flag for investors. CZ then defended itself by claiming that the operation from Binance was required by Mazars. Ultimately, Mazars did not confirm or comment on the reports;
• The exchange promises that more information about its financial condition, including reserves in other cryptocurrencies, will be disclosed in the next few weeks, which has only fueled investor concerns;
• Binance declined to answer questions about who the company is - the exchange's main shareholder arguing its reluctance to answer with the company's ongoing 'reorganization' that has been underway for more than a year;
• Reuteres revealed more details on the US Department of Justice's ongoing investigation of Binance since 2018. According to some of the at least 12 prosecutors involved in the case, the evidence gathered so far could result in criminal charges being brought by the DoJ against Binance executives. The charges include money laundering of financial institutions and enabling the circumvention of sanctions. 
• According to Reuteres, last year the exchange recruited officials from the investigative division of the Internal Revenue Service, a U.S. government agency that investigated Binance offering high salaries. The exchange was also said to have regulated strict secrecy rules on employees including the use of encrypted communication channels and deletion of correspondence.

News

• Gaming studios Ubisoft and SEGA will use the Oasys blockchain designed for Web 3.0 games, but some gaming giants are still wary, especially of NFTs, which are not accepted by Steam or major titles like Grand Theft Auto and Minecraft;
• According to information circulated by Charles Hoskinson, founder of Cardano, the long-running dispute between Ripple and the U.S. Securities and Exchange Commission could end as early as December 15. Hoskinson indicated that regardless of its outcome, the decentralized industry will continue to grow. However, it seems that a settlement in favor of the SEC could exacerbate the cryptocurrency sector's problems. Ripple's management has been accused of selling unregistered securities as U.S. regulators seek to put cryptocurrencies on par with the stock market and bring it under twin regulations.

Cryptocurrencies - on-chain summary

Bitcoin's volatility has fallen to levels not seen since October 2020, and previously only seen in November 2018 and May 2019. In the past, such situations have heralded its surge, which usually ended with a rise in Bitcoin's price.  However, looking at the chart holistically, we can see that Bitcoin's volatility has been successively declining since January 2018, and in fact (which the chart does not take into account) since its inception. Source: Glassnode

The trading volume of futures traders for Bitcoin and Ethereum has fallen to the lowest levels since the beginning of 2021, the lowest in the entire recent Bitcoin 'cycle'. Volumes today average $9.5 billion for Ethereum and $10.5 billion for Bitcoin. The shallowness of the market means that the impact of the big news could cause a price shock further supported by the drying up volatility of cryptocurrencies again. Source: Glassnode 

Long-term investors (LTHs) capitulated twice this year and sold off Bitcoin reserves at a record pace, incurring losses. First in the May/June period and in November, after the FTX bankruptcy. It was in November that the daily realized LTH was a record 0.10% of total daily supply. In previous cycles, capitulations of this magnitude have heralded an impending bull market. It is worth comparing the LTH realized loss to March/April 2020, when the pandemic was breaking out and financial markets were in upheaval. Compared to the 2022 bull market, its scale looks downright microscopic, which illustrates the level of market oversold. Source: GlassnodeDespite massive declines over the past year, the supply available in the hands of long-term investors (LTHs) has grown to historic highs. They now hold more than 13.9 million BTC i.e. more than 72% of all Bitcoin. It's worth noting that LTH reserves have grown very quickly above pre-FTX collapse levels. This means that the market is beginning to be dominated by the portion of investors with the highest level of conviction, which historically in the lows of the bull market has indicated an impending supply and trend change. Source: GlassnodeDuring the recent bull market fueled by the Fed's additions, investors earned nearly 400% more than during the 2018 bull market. Bulls realized nearly $445 billion in gains, which is still more than double the amount of total realized losses since November 2021. These also turned out to be a record $213 million and, similar to the gains, are also 4 times higher than the bear market of the previous cycle. Interestingly, at the present time, the proportion of realized gains and losses coincides with the previous bull market. Currently, losses correspond to 46.8% of gains during the bull market. At the bottom of the 2018 bull market, it was 47.9%. Source: Glassnode

Binancecoin chart, D1 interval. The price of the Binance exchange-traded token has settled back below the 200-session average and is testing levels around $260, where the sell-off caused by the collapse of FTX previously stopped and where we see the 61.8 Fibonacci retracement. A drop below could open the way to the area of $240 per token, where the 71.6 Fibo abolition runs. However, this support appears relatively weak, and if the sell-off deepens bears may want to seize the opportunity to test the yearly lows near $185 per token. Source: xStation5