After a brief period in which its price seemed to be heading toward the $20k mark, Bitcoin (BTC) has dropped to below $17k. The reason behind the sudden price dip might have to do with Binance solvency rumors.
The story goes that the world’s largest cryptocurrency exchange might be the next target of a money laundering lawsuit in the United States.
The rumors sparked a massive withdrawal of crypto assets from the Bitcoin accounts – more than $500 million in a day – which, in turn, had a negative effect on the BTC price.
Binance Boss Calls Rumors a FUD
The CEO of Binance, Changpeng Zhao a.k.a. CZ labeled the recent insolvency rumors as a FUD (fear, uncertainty, and doubt) campaign.
Obviously, the root of all crypto fear comes from the fact that a couple of major players from the cryptocurrency industry have already gone bust in 2022, the best example being FTX.
However, what started all the Binance insolvency talk is Reuters’ report about the crypto exchange getting on the radar of the US Justice Department. The report suggests that DOJ officials are investigating possible money laundering violations involving Binance.
The company denied this, but it didn’t stop users from trying to move their crypto assets away from Binance. We’re not just talking about micro users, but crypto whales as well. The founder of TRON Justin Sun had reportedly withdrawn $100 million from Binance before getting it back a few days ago.
Binance Temporarily Stops USDC Withdrawals
What ignited the Binance insolvency rumors, even more, is the company’s decision to halt withdrawals of stablecoin USDC last Tuesday. Users panicked, but the exchange was quick to assure them that nothing shady was going on.
As per Binance’s statement shared on Twitter, the reason behind the suspension of USDC withdrawals was carrying out a token swap – exchanging one digital currency for another without using fiat currency.
The pause of withdrawals lasted for just eight hours, but it still had a significant impact on the users’ faith in cryptos. It prompted Binance users to move/sell their crypto assets, especially Bitcoin, whose price has dipped to 16,886.90 USD at the moment of writing (Friday, December 16).