Victory Coinbase

The Sword of Damocles hanging above crypto markets, the unresolved rumor of a DOJ enforcement action against Binance, is finally resolved. On November 21st, news broke that Binance and the DOJ had settled. Rumors of some enforcement action against Binance had been floating around for a while, and they were correct. Binance has agreed to pay a $4B fine. CZ will also step down, but Binance can still operate.  

The market reaction to this news was muted, with markets unable to decide if the resolution was bullish or bearish. For me, however, a resolution of the ‘Binance question’ is wildly bullish. The market has performed exceptionally well since the beginning of the year. But I was reticent to get too excited because there was always the big unknown event around Binance. Now, that unknown is known; realistically, it doesn’t seem that bad. The market can move forward without the Binance question hanging over our collective heads. The SEC and other countries could still bring enforcement against Binance, but it seems that the worst is behind them. Resolving the Binance question checks the final box on my bullish checklist.

Victori Sunt Spolia

The enforcement news against Binance also leaves Coinbase in a league of its own. With Binance taking a regulatory and reputational hit, all roads lead to Coinbase and $COIN.  The enforcement action has made Binance persona non-grata to many existing and potential users. These users will still want a large, reputable, and secure exchange, of which there is now one for the US market: Coinbase. Financial advisors, funds, banks, and other capital allocators that want access to crypto markets will avoid Binance like the plague now (if they haven’t been already). If these entities wish to get involved with crypto, they will go with Coinbase. The DOJ has left Coinbase as the only place in town for most of the US market.

Retail investors will now be cautious when it comes to Binance. The settlement opens up other potential actions, and after the hard lessons of FTX, they will be hesitant to trust uncertain exchanges like Binance. These users will probably transition to Coinbase if they haven’t already. The volume and fees from being in a league of its own should be a hell of a tailwind for $COIN. 

Of course, Coinbase has its pending challenge from the SEC, but it seems unlikely that it is as bad as Binance’s settlement. Once that’s resolved, Coinbase will still be the biggest exchange in town, have gone through the SEC gauntlet, and have a clean reputation. The Binance news is good news for markets, and great news for Coinbase.

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