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All Eyes On US Inflation Data, Binance Faces Withdrawals

Bitcoin price may range from US$19K to US$25K depending on inflation data. Binance withdrawals and BUSD redemptions surge post Paxos crackdown, while Circle blew the whistle on Binance reserves to NYDFS.

February 14, 2023 - In a few hours the most anticipated macro data release this year will be out, which may cause another risk asset rally or an overall sell-off. The January US inflation data will be released at 8:30 EST with the market expectation of 6.2% (vs 6.5% in Dec) reading. The recent regulatory crackdown on crypto curbed the January Bitcoin rally, but a inflation number below-than-expected could give the market another leg up. On the other hand, an above-than-expected reading could lead Bitcoin prices below US$20k. Indeed, market analysts are looking at a US$19k possible price if the macro data disappoints, and US$25k if it beats expectations. We expect January US inflation to come in line with expectations, which could give the market a momentary relief.

Following the announcement of SEC and NYDFS measures against Binance's dollar stablecoin (BUSD) issued by Paxos, there has been significant withdrawals from the exchange. Likewise, the BUSD has recorded significant redemptions, with 342mn BUSD burned over the last 24 hours according to Peckshield. The platform Nansen shows that Binance recorded 24-hour multichain token net outflows of US$788.5mn, caused by outflows of US$2.7bn exceeding inflows of around US$1.97bn. In our view, these withdrawals were expected with customers trying to protect their assets. However, Binance does seem to be handling it properly.

According to a Bloomberg report, Circle alerted NYDFS in 3Q 2022 complaining that Binance’s reserves were insufficient to support its tokens, seemingly including stablecoin Binance USD based on blockchain data. Circle’s actions came prior to the SEC’s plans to file a lawsuit against Paxos, claiming that BUSD was an unregistered security. In our view, this adds another layer over the regulatory crackdown, showing that the competition in the sector may cause more turmoils moving forward.

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