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Trading crypto on Binance gets tough- Order Book liquidity tanks 25%

TL;DR

  • Binance’s CEO’s departure and the $4 billion settlement of U.S. criminal charges on Tuesday didn’t destabilize the crypto market. However, Binance’s order book liquidity has suffered, hampering huge trades.
  • Top cryptocurrency exchange liquidity, defined by 0.1% and 1% market depth indexes, has dropped 25% to less than $150 million and roughly $180 million. 
  • The crypto market is in the red, as the market cap drops (-1.45%) $1.44 trillion. The Bitcoin market cap sits at $714 Billion, a  49.59% market dominance. Binance’s BNB price sits at $234, down 9.47% since CZ stepped down.

The capacity to place trades quickly on crypto quoted prices, otherwise termed as the order book liquidity, has dropped in Binance. This incident can be linked to specific events in the crypto world, especially news on the CZ stepping down from his CEO position in the exchange platform. 

The move has seen a drop in order book liquidity as well as a drop in the BNB, Binance’s native token, by 9.60% in the past 24 hours. Other cryptocurrencies have also seen a drop in market value, according to a daily analysis following the announcement of the Binance CEO, Changpeng Zhao, on ending his legendary reign in the crypto space as the top executive of the top cryptocurrency exchange. 

Binance’s order book liquidity tanks – Here’s why

On Tuesday, Binance, the leading crypto exchange, agreed to a settlement for criminal charges placed against them by the US. The settlement is worth $4 billion and affected the entire digital realm with wider destabilization implications that could devastate crypto investors. Moreover, these events have affected the order book liquidity in the exchange, which presents a challenge for large traders to place their investments. 

Part of the implications brought about by the news is the liquidation of crypto assets worth $1 billion from the exchange. This withdrawal is a direct sign that investors and crypto enthusiasts alike are skeptical about the platform’s future since CZ was considered a pro leader in the digital currency sector. 

The crypto exchange platform’s cryptocurrency liquidity has plummeted by 25%, totaling between $150 million and $180 million, respectively, for the 0.1% and 1% liquidity metric measures used in the exchange. 

This fall has been witnessed in the past 24 hours, according to Kaiko, a leading crypto data analysis company. Additionally, market depth refers to a collection of trade bids and ask orders placed during a specific percentage of mid-price. This can also be termed as the average of buy and sell prices. 

Simply put, placing large orders in Binance has now become a challenge since the crypto whales are easily exposed to slippage. This means that it is tough to limit the risk involved in placing orders based on the movement between the quoted price at places where traders enter the market and the amount paid during the filling of orders. 

However, one question arises: has the liquidity shifted to other exchanges? This is yet to be confirmed as the market analysis shows a drop in Binance’s liquidity since November 21. 

CZ’s legal case with the US

Changpeng ‘CZ’ Zhao pleaded guilty to charges placed against him by the United States that favored a settlement of $4.3 billion. This amount has been quoted as “one of the largest penalties” in the history of digital currencies. 

The guilty plea in Seattle to the allegations confirms that CZ will pay a $50 million fine and an additional penalty of stepping down as Binance’s CEO. In a temporary takeover, a firmer Abu Dhabi regulator, Richard Teng, will take up the CEO role. 

According to the court filing on Tuesday, the charges placed against Binance were on allegations of failing to uphold a proper anti-money laundering scheme. These allegations explained the exchange’s inability to maintain a clean record free from operations of unlicensed money-transmitting activities. 

Moreover, the platform was also charged with violating sanction laws. During a press release on November 21, Attorney General Merrick Garland mentioned:

 Binance employees knew and discussed that the company was serving thousands of users in sanctioned countries, and they knew that facilitating transactions between U.S. users and users in sanctioned countries would be in violation of U.S. law. But they did it anyway.

Attorney General Merrick Garland 

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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