Recent developments in the Ethereum ETH -1.29% network and the actions of Binance, one of the leading cryptocurrency exchanges, have created a dynamic situation in the crypto market. The price of Ethereum (ETH) has been trading above the $2,000 level as of November 23, with a brief retest of $1,930 on November 21. This stability is reflected in a 2.5% increase in Ether’s price and a 0.5% growth in its total market capitalization over the past week. The driving forces behind this trend include improved decentralized applications (DApps) metrics, increased protocol fees, and Ethereum’s dominance in the non-fungible token (NFT) market.
Binance, a significant player in the Ether market, accounts for 30% of ETH futures contracts’ open interest. The closure of Binance’s $2.35 billion worth of ETH derivatives contracts within a short period has raised concerns about potential market impacts. Despite this, Binance witnessed net outflows of $1.53 billion between November 21 and November 23. The regulatory landscape surrounding Binance presents both risks and opportunities. Some view Binance’s actions as evidence of sufficient reserves, while others express concern over the $4.3 billion fine facing Binance and its former CEO, Changpeng “CZ” Zhao.
The repercussions of Binance’s regulatory challenges are complex. The relationship between Binance and stablecoin issuers like Tether (USDT) is under scrutiny. Government agencies have gained access to previously undisclosed money laundering and terrorist financing operations through Binance, increasing the likelihood of regulatory actions against stablecoin providers. This development has negatively affected Ethereum due to Binance’s position as the third-largest ETH staker, with $1.24 billion in deposits. However, Binance’s move towards full compliance could reduce risks associated with unregulated exchanges and increase the likelihood of the U.S. Securities and Exchange Commission (SEC) approving spot exchange-traded fund (ETF) instruments for cryptocurrencies. Additionally, the SEC’s lawsuit against Kraken, which excludes Ether, reduces potential regulatory actions against the Ethereum Foundation and related entities from the 2015 initial coin offering (ICO).
The Ethereum network’s health is also evidenced by the total value locked (TVL) in Ethereum DApps, which reached $26 billion on November 23, a 5% increase from the previous week. This growth indicates the continued strength and expansion of the Ethereum ecosystem. Ethereum also maintains its leadership in NFT sales, with $12.6 million in transactions within 24 hours, reaffirming its position as the preferred blockchain for major NFT projects.