In the past few weeks, negative publications about Binance and Tether have been regularly appearing in the media. Experts assessed the impact of the negative news background on the movement of the crypto market
“Unfortunately, a lot of misinformation has spread about our company, and we would very much like to make adjustments,” said Patrick Hillmann, chief strategist at the largest exchange Binance, in a comment to Forbes reporters, refuting allegations of money laundering, which the publication wrote about a few days earlier.
A series of revealing publications about the largest crypto exchange coincided with the fall in the price of bitcoin and other crypto assets, including the exchange’s own coin, BNB.
The accusations were included in a letter from Senators Elizabeth Warren (D-Mass. ), Chris Van Hollen (D-Md. ), and Roger Marshall (R-Kan.) to the company requesting financial data, including balance sheets going back to 2017 and any documents pertaining to a rumored 2018 plan to “distract regulators with feigned interest in compliance.”
The CEO of Binance, Changpeng Zhao, and the head of Binance’s American division, Brian Shroder, were the recipients of the letter.
Zhao, also known by the initials C.Z., objected but did not address any of the specifics in the letter, which was dated March 1.
In the same Forbes, a week before , an investigation was published where Binance was accused of allegedly sending part of the stablecoin collateral for undisclosed purposes, leaving users without covering their deposits. The head of the exchange, Changpeng Zhao, openly commented on the article, speaking of “deliberately distorted facts” and “emphasis on his ethnicity.”
Later, a post appeared on the Binance blog with details on the technical side of the exchange’s work with wallets and reserves. The text confirmed that the process of managing those tokens that the journalists wrote about “was not always perfect”, but this “did not affect the security of the funds of the exchange users in any way.”
In a statement sent via email, Binance’s chief strategy officer Patrick Hillmann said the exchange appreciated the chance to defend itself but did not specifically address any of the issues brought up or the seven demands for information from the legislators.
He tells Forbes that the business will “give information to help people better understand why we remain the most trusted platform with users throughout the globe” and that “unfortunately, a lot of misinformation has been propagated about our company and we look forward to correcting the record.”
Binance is not the only major player in the crypto market whose activities become the object of attention of journalists from well-known American business publications with relative regularity. On March 3, The Wall Street Journal published an investigation into the issuer of the largest USDT stablecoin, Tether. Referring not to sources, the journalists listed several cases in which the company’s management allegedly provided fake documents to banking partners at various times.
The material created a resonance in the crypto community. Tether published an official retraction of the journalists’ statements, urging them not to respond to “rumors and misinformation.” Tether CTO Paolo Aordino, in his personal accounts on social networks, without hesitation in expressions, called the materials of the publication “clownish”, commenting on them in a similar vein not for the first time.
CZ had already responded to the Forbes piece on Twitter, but she omitted to discuss the transferred collateral, which was supported by blockchain data.
The senators’ letter requests, by March 16th, that the Binance units supply supporting information and responses to a number of inquiries.
The lawmakers wrote: “Your companies’ apparent attempts to evade the enforcement of anti-money laundering laws, securities laws, information reporting requirements, and other financial regulations cast serious doubt on the stability and legitimacy of Binance and its related entities, as well as on your commitment to your customers.
Four hours after the publication of the WSJ, the bitcoin rate fell by $1.2 thousand in less than an hour, and the total capitalization of the crypto market decreased by $60 million. Earlier in the day, it became known about the problems of the Silvergate bank, which provided a gateway for dollar payments thousands of cryptocurrency companies, the largest of which hastened to publicly declare a break in relations with the bank.
“Tendency to Discredit”
Analysts call what is happening in the media an information campaign against the crypto sector. According to Bestchange Senior Analyst , there is a noticeable tendency for the US to discredit crypto projects. Since the most “media-successful” crypto companies are Binance and Tether, it is against them that campaigns are being launched to worsen their reputation, the analyst believes.
Tether and Binance, being one of the largest and at the same time non-public companies on the market, are “sort of tidbits” for journalists, Taisiya Romanova, a crypto expert and author of the GFiS Channel telegram channel, agrees. The status of a non-public company really gives them the opportunity not to disclose the financial aspects of their business and leaves room for speculation on those “crumbs of information” that fall into the public field. This does not mean that there are no and cannot be questions about the activities of the companies themselves, the expert clarifies.
“For the sake of fairness, these projects could really break many rules at the dawn of the development of the consumer cryptocurrency market, when it had the conditions of the “Wild West”, the trail from which can stretch to the present day,”
A possible reason for the mass negative publications could be the fact that “some forces in the United States are aimed at limiting any uncontrolled cash flows in the cryptosphere,” Zuborev admits. Unlike U.S.-registered crypto exchanges, large financial ecosystems that operate outside their jurisdiction may, according to regulators, directly threaten the interests of the country.
Market impact
In each case, representatives of both companies spoke directly about a custom-made program of smearing in the media. In January, Zhao named the bankrupt FTX exchange, which allegedly allocated $43 million to publish negative materials, as a likely customer. Both Tether and Binance call accusatory publications the term FUD and suggest ignoring any manifestation of it.
FUD (from the English Fear, uncertainty and doubt – “Fear, uncertainty and doubt”) is a tactic of psychological manipulation, which consists in presenting information about something in such a way as to sow uncertainty and doubt in the audience about its qualities or cause fear.
Publications in the media act as a tool in creating a certain narrative in the market, Romanova notes. Many market participants use algorithmic solutions to analyze sentiment in publications and social networks, and they use this both for profit and for the purpose of “provoking other participants” in the market, especially retail investors.
Santiment’s analytical resources are able to track the “mood” of the market by monitoring the mentions of keywords in thematic publications on social networks. After the release of the WSJ material about Tether, Santiment noted “an unusually high level of negative sentiment towards cryptocurrencies” and “one of the highest levels of FUD” ever recorded by the company.
According to the March 7 Santiment metrics , traders and holders of the leading cryptocurrencies “are still skeptical.” As soon as FUD volumes in the market subside, this can serve as an indicator of the growth of crypto assets, the company’s analysts believe, based on historical experience.
“Perhaps these are coincidences, but in previous years it was major scandals that coincided in time with the beginning of a collapse in prices in the market.
But it is also true that many negative news are not the cause of the fall, but its consequence, ”says Zuborev. Such newsbreaks rarely have a long-term effect, they only “slightly increase the amplitude of local trends”, but in reality they have almost no effect on the market, the analyst explains.
😒 Traders and hodlers of top cap assets are showing skepticism after markets have failed to rally following the February 21st peak. As #FUD settles in, according to our metrics, probabilities of price bounces increase during this period of disbelief. https://t.co/Mg365PKjqX pic.twitter.com/ERqpPdkTyH
— Santiment (@santimentfeed) March 7, 2023
If we talk specifically about the concentration of such news, it is quite natural that in moments of prolonged stagnation there are much more of them than in days of stable growth, so there is a certain correlation between the increase in the FUD factor and the end of the global downtrend. But it is impossible to predict the behavior of the market based on this factor; there are no qualitative or quantitative indicators to assess the depth of influence on prices. This pattern can only be verified retrospectively, so this fact is of no practical use, Zuborev summarizes.
In such a high-risk area, there is always the possibility that the next FUD without convincing evidence will actually turn out to be true, as was the case with FTX, notes Taisiya Romanova. It is impossible to protect yourself 100% from this, so it is important to pay attention to risk management when trading crypto assets.
