Whales and Artificial Intelligence: Binance’s Former CFO Explains Why the Crypto Market Is Stuck

Wei Zhou, the former chief financial officer of Binance, the largest crypto exchange by trading volume, has listed the reasons the crypto market is stuck in a prolonged bear trend and named the factors that could trigger a new bull rally. His comment came against the backdrop of a sharp drop that wiped out the market capitalization of the entire sector.

Zhou’s view deserves attention: for years he oversaw the finances of one of the industry’s largest platforms and understands the mechanics of the market from the inside. By his logic, the sector’s current weakness is not a death sentence but largely the result of a temporary flow of money into more fashionable assets. Once that trend reverses, capital could just as quickly return to cryptocurrencies and push quotes higher.

Why the Market Is Stuck

As the first reason, Zhou named the large losses of “whales” — holders of big amounts of bitcoin. When such players lock in losses, prices of cryptocurrencies move down, and along with them the market’s market capitalization shrinks. Tellingly, the crash came almost immediately after a record: on October 6, bitcoin set a new all-time high of around $126,200, but as early as October 10-11 prices collapsed.

The second pressure factor, the former Binance executive believes, is the growing competition from artificial intelligence. The AI market shows higher returns, and it is easier for investors to earn there than on volatile cryptocurrencies. Part of the capital is flowing out of crypto into AI projects, which additionally weighs on prices and hampers the recovery of the previous market capitalization.

There is also a structural problem — liquidity. During sharp sell-offs, liquidity in the exchange order books drops, there are not enough buyers, and even small sales move prices down more strongly. The thinner the market, the more painful each wave of decline is for the market capitalization of individual coins.

The behavior of institutional investors also plays a role. Outflows from spot exchange-traded funds deprive the market of an inflow of fresh capital, while the caution of large funds intensifies the downward pressure. In such an environment, even positive signals do not immediately translate into sustainable growth, and the sector gets stuck in a sideways range for a long time.

What Could Trigger a New Rally

That said, Zhou also sees reasons for optimism. In his opinion, a powerful growth catalyst could be softer regulation of cryptocurrencies in the United States. A bill distributing oversight of the market between the SEC and the CFTC and clarifying the yield on stablecoins could boost the trust of large companies in cryptocurrencies and attract new participants. More participants means higher demand, prices, and overall market capitalization.

The turnaround could also be accelerated by tech giants, Zhou suggests. If Google and Meta launch their own blockchain platforms where developers can issue tokens, this would spur interest in cryptocurrencies and bring capital back to the market. Such an inflow could noticeably lift prices and restore the sector’s market capitalization.

A Dissenting View

Not everyone shares this view. For instance, Galaxy Digital CEO Mike Novogratz named the sale of bitcoins by Michael Saylor’s company Strategy as the main reason for the drop — even though it involved a relatively small amount of coins. That news only heightened the nervousness around cryptocurrencies.

What Investors Should Watch

For now, the crypto market remains under pressure from several factors at once, and there is no single recipe for recovery. Investors should watch the behavior of large holders, market dynamics, and regulatory signals: these are what will determine when the prices of cryptocurrencies and the sector’s market capitalization begin to rise again.