.CFTC's lawsuit against binance is likely to weigh over the crypto market liquidity, paving the way for wild price swings in top digital assets, including bitcoin, according to market observers. Reports godbole17.
crypto markets since the collapse of FTX in November, could worsen, breeding price volatility as regulators go after dominant exchange Binance.for running an alleged"illegal exchange" and a"sham" compliance program. The regulator, which is responsible for oversight of commodities and derivatives markets, including the derivatives tied to bitcoin , sued Binance CEO Changpeng Zhao and former top compliance executive Samuel Lim, alleging"wilful evasion" of the U.S.
"The main worry is what this will do short-term to market liquidity - if market makers step back from trading on Binance now, and if Binance's U.S.-based trading desks have to stop operations, that will reduce liquidity in an already thin market," Noelle Acheson, the author of the popular Crypto is Macro Now newsletter, said.
The greater the market depth, the less likely that large buy/sell orders will cause significant deviations in the asset's market price. Market makers are entities that provide liquidity to a financial market by creating buy and sell orders that aren't executed immediately.Bitcoin's 2% market depth slipped to a ten-month low last week, extending the deterioration seen since FTX's sister firm Alameda Research, formerly one of the largest market makers, closed shop five months ago.
"It is clear that the CFTC wants oversight on all crypto exchanges. It's not something new, but the market is reacting prudently and we are still holding our breath for further negative news, which may push BTC down," Kssis told CoinDesk.
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