- Binance’s market shares in trade volume dropped from 70% to 54% as it faces a lawsuit by the US CFTC for offering unregistered trading services in the US.
- Kaiko’s analysis shows that the drop was mainly due to the halt of the zero-fee program and not caused by the lawsuit.
- Binance US triples its market share in trade volume in the first quarter.
Binance, the largest cryptocurrency exchange by trading volume, still maintains dominance after losing part of its trading volume market share due to the lawsuit filed by the United States Commodity Futures Trading Commission (CFTC).
According to a report by Kaiko, a blockchain analytics platform, Binance has lost 16% of its market share in trading volume over the past two weeks following its decision to halt its zero-fee trading program in addition to the CFTC lawsuit. The exchange has, however, remained the largest by trading volume with a 54% market share.
On March 27, the CFTC filed a suit against Changpeng Zhao (CZ) and his exchange, Binance, for allegedly offering unregistered crypto derivatives products to US citizens against Federal law. Binance was sued for seven violations of the Commodities Exchange Act and controlled foreign company rules due to the trading services they offered to Americans without first registering with the proper market authorities.
However, most of the plunge was caused by the exchange’s decision to end zero-fee trading for 13 trading pairs, including BTC, ETH, and BNB, with several fiat currencies and stablecoins.
The Kaiko said the report stated:
“Overall, Binance’s excess volume largely vanished with the end of zero-fee trading, which was reflected in an even dispersal in market share among the remaining exchanges.”
This decision resulted in the exchange experiencing its lowest BTC volume day since July 4, 2022, two days before it commenced the zero-fee trading program, as the overall bitcoin spot exchange volume fell 86% and the overall trade volume for the 13 pairs dropped to 30%.
Binance Q1 Wins
Despite the fall, Kaiko stated that the Binance.US branch relieved the situation as its market share tripled from just 8% to more than 24% despite the outstanding lawsuit. With this growth, the department has begun to eat down Coinbase’s market share from 60% to 49%.
Clara Medalie, director of research at Kaiko, stated, “I think traders are far more cost-conscious. The CFTC lawsuit barely made a dent in derivatives volume or volumes on Binance.US, which was not part of the end of the zero-fee program.”
Important to note is that the US branch still offers zero-fee trading across Bitcoin, Ethereum, and stablecoin pairs.
The exchange also maintained its dominance in the derivative market, having lost only 2% for the entire quarter. This supported the argument that trade volumes were lost due to the end of the zero-fee program and not the lawsuit.
” But the trend is quite different when looking at derivatives volumes: Binance only lost about 2% of market share for perpetual futures trade volume. This suggests that the majority of market share was lost purely due to the end of zero-fee spot trading, rather than trepidations around a lawsuit.”
Also on a winning trend was the Upbit exchange, the only one out of the 17 exchanges that Kaiko analyzed that claimed a significant amount of the trade volume market shares, with most of them being in XRP, which would surpass BTC and ETH on some days.
Generally, the US crypto market is fragile due to the ongoing regulatory crackdowns on exchanges. As a result, more crypto users are expected to transition to decentralized exchanges such as Uniswap or resolve to self-custody.