Binance's regulatory troubles may exacerbate liquidity problems in crypto markets, which have been plaguing the industry since the collapse of FTX in November. The US Commodity Futures Trading Commission has sued Binance for running an alleged illegal exchange and a "sham" compliance program. Binance has long been the leading digital assets exchange, accounting for 81% of the total bitcoin traded on centralized exchanges in February. Observers worry that the lawsuit would bring a deeper decline in market liquidity, exacerbating volatility and causing large players to stay on the sidelines. Liquidity is measured by a metric called the 2% market depth, which has been slipping since FTX's sister firm Alameda Research closed shop five months ago. Some observers expect bitcoin to revisit former resistance-turned-support near $25,000 in the wake of regulatory uncertainty.

(By Omkar Godbole)