The End Of Crypto Currency

Uploaded on 2023-12-11 in FREE TO VIEW, BUSINESS-Services-Financial

In August 2023 US federal prosecutors started to build a criminal case against leading cryptocurrency exchange, Binance. Initially tere were concerns that a US court indictment and that they were worried might cause investors to rapidly withdraw their funds, potentially creating panic in the crypto markets.

Now, the US regulatory authorities will impose a multi-billion-dollar payment from crypto exchange Binance in return for discontinuing their criminal investigation, totalling a breathtaking $4.3 billion. This coincides with the failure of the FTX crypto currency business and the likely imprisonment of its CEO, Sam Bankman-Fried.

This follows the news that Binance’s CEO, Changpeng Zhao, has stepped down and will plead guilty to violating criminal US anti-money-laundering requirements and that Richard Teng will be the new CEO.

Although crypto prices have risen from the depths they experienced in the 2022 crash, they are below the highs of their peak two years ago. The crypto market is used by only a small number of traders, transaction volumes are low and when there aren’t many sellers, it takes just a few bids to increase prices.

However, demand is decreasing and the well-reported difficulties of the major crypto exchanges including FTX and Binance, are making the crypto market’s future look like a major challenge.

The creation of Bitcoin, which is the original crypto-currency, was apparently an act of warfare against the Western financial system. Following the 2008 financial crisis, asset markets crashed and the banks which had caused the turmoil looked set to collapse, many ordinary folk felt justice was being done. But the central banks rescued the financial markets with huge injections of money, thereby boosting asset values. Bitcoin’s creators took advantage, by creating an asset with a fixed supply, its inventors ensured its continued inflation, since the rising supply of money would drive its price continually upwards.

From its initial value of only a few dollars, Bitcoin would eventually surge to trade for more than $60,000. Now that values have fallen significantly - presently a Bitcoin is worth $40,000 - and crypto currency exchanges have become unstable, financial services regulators and central banks have been paying much closer attention.

Crypto’s fundamental challenge remains. It seems to function as a digital substitute for gold, an essentially useless asset that people hold as an inflation hedge. But as numerous commentators have pointed out, why not just stick with the physical assets that is gold?

Now that inflation is forcing central banks to reduce that supply, speculative assets are losing their allure. That means the crypto currency exchanges which live off them, like Binance, are losing their value. Although Binance may prove resilient enough to keep trading, unlike FTX, the trajectory for the crypto exchanges seems likely to continue to be down .

Binance: CNN: @RichardTeng: FT: Fortune: Unherd: Coindesk: NYMag Intelligencer: Investopedia:

Image: Joshua Woroniecki

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