Binance.US’ Market Share Tripled in Q1, Despite CFTC Action
Although still in its own category as a cryptocurrency exchange, Binance’s global market share suffered a -16% drop between March and April. However, despite the recent regulatory action against the exchange, its US affiliate Binance.US saw its volume triple over the same period.
Binance Market Share Expectedly Shrunk Through Q1
The erosion of trust in centralized institutions appears to be creeping beyond US banks and into crypto exchanges. As the JP Morgan of crypto exchanges, Binance withstood multiple FUD waves post-FTX crash. Although reserve-proofing is no longer in the public spotlight as it used to be, the latest CFTC/China links drama around Binance is taking its toll.
Or is it? April’s Kaiko report shows that Binance’s global market share shrunk by -16% over the last two weeks, going from dominant 70% to borderline 54%.
However, the CFTC civil complaint is likely a case of correlation being conflated with causation. Binance’s policies contributed to the sharp Bitcoin trading volume downturn last week, not seen since July 2022. This was sparked by Binance terminating its zero-fee trading promotion on March 22.
Since last July, this promotion has affected 13 Bitcoin spot-trading pairs, making it responsible for 66% of Binance’s trading volume. In this light, Binance’s market share was likely to shrink regardless of regulatory crackdowns via ‘Operation Chokepoint 2.0’.
Most recently, another Binance FUD appeared. Short-lived, wild rumors spread that Interpol issued a Red Notice for Binance CEO Changpeng Zhao (CZ)—the same international warrant issued for Do Kwon, the founder of failed Terra Labs. However, as FUDs go, it was poorly executed.
The question is, how are other crypto exchanges performing, considering their smaller sizes are less amenable to regulatory blows?
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Binance.US Bites into Coinbase Dominance
Just as the CFTC charged Binance with KYC breaches and other compliance oversights, the SEC came after Coinbase for listing unregistered securities. As another legal battle is brewing, this was a significant signal for the market.
Since March 22, the same day Binance ended its zero-fee promotion, Coinbase (COIN) stock dropped by -26%. For the whole Q1’23 period, Coinbase lost 11% of the US market share. Interestingly, Binance.US gained the upper hand, tripling its US market share from 8% to over 24%, according to Kaiko.
It appears that Coinbase’s tight relationship with US law enforcement agencies has been less fruitful than expected. Seeing the rising tide of regulatory uncertainty, other exchanges are downsizing US operations.
Previously, Kraken, having received an SEC Well’s notice, shut down its staking service. Last Friday, Bittrex announced the complete shutdown of business in the US on April 30, citing unclear regulatory requirements and an uneven competitive landscape. This marks the end of the exchange’s 9-year stint in the US. Bittrex assured all customer funds would be ready for retrieval.
Alongside Binance.US tripling its US market share, Korean Upbit is among the few exchanges to increase its trading volume. Much of it is from speculation on the outcome of the Ripple Labs vs. SEC legal battle.
Accordingly, the most traded pairs on Korean Upbit and Bithumb exchanges have been XRP/USDT and XRP/KRW, with their volumes surpassing both BTC and ETH. Over the month, XRP is up by +33%, as the expected ruling should be delivered by the end of April or even May.
Regardless of the outcome, the spike in XRP trading volumes is temporary. Ethereum (ETH) will likely become the focus ahead of the milestone ‘Shapella’ upgrade on April 12.
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