- The BTC/USD pair was trading at a premium of $234 on Binance.US.
- The exchange’s market share fell from 20% in April to less than 5% on June 12.
The US Securities and Exchange Commission (SEC) legal action against Binance [BNB] has created ripples in the broader crypto market. One of the biggest victims of the entire episode is Binance.US, the US arm of the crypto giant.
According to the data provider of digital assets Kaikothe exchange’s market depth has shrunk more than 76% since the SEC lawsuit was filed a week ago, driven by the large-scale exodus of jittery market makers and traders.
Source: Kaiko
Liquidity crisis
Market depth is the ability of an exchange to accommodate relatively large market orders without materially affecting the price of the security. Simply put, it is a measure of liquidity in the market.
After the SEC’s attempts to freeze Binance.US assets came to light, market makers, who provide the bulk of the liquidity, quickly moved out of fear that their assets would become trapped on an exchange, much like the infamous FTX saga.
As liquidity dried up, Bitcoin [BTC] trades at a premium on the exchange compared to other competing platforms. According to TradingView, the BTC/USD pair was trading at $26,316 on Binance.US at the time of publication, $234 more than the largest crypto exchange in the US, Coinbase.
Source: TradingView, BTC/USD BinanceUS
Binance.US loses market share
Binance.US’s latest decision, which suspended all forms of USD trading on the platform from June 13, turned out to be a death knell. After the exchange asked users to withdraw their dollars before the June 13 deadline, many investors rushed to cash in their BTC, further eroding liquidity on the platform.
This also resulted in a sharp drop in trading activity on the platform. Trading volume on the Binance.US market fell the most compared to other trading platforms in the US market. Kaiko stressed that the stock market’s share of the pie fell from 20% in April to less than 5% on June 12.
Source: Kaiko
Read Bitcoin [BTC] Price Forecast 2023-24
Interestingly, Coinbase’s stock has surged from 46% to 64% over the past week, with no reasonable explanation. However, Kaiko’s analysis predicted that it could be the biggest loser in the end, as 80% of its business was concentrated in the US market.
Coinbase has been trying to expand into other markets to overcome the headwinds in the US crypto scene. CEO Brian Armstrong previously said moving the exchange’s headquarters to the United Kingdom is “on the table” if regulations in the United States do not improve.
