Home Analysis Is Binance’s dominance falling?

Is Binance’s dominance falling?

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important point

  • Binance now has 48% of trading volume, up from 66% at the beginning of the year.
  • Exchanges are plagued by a number of regulatory issues, while a lack of transparency is causing concerns in the market
  • Following many companies in the industry, the company is also planning a series of layoffs.

The world’s largest cryptocurrency exchange rules the world. Late last year, CCData reported that Binance had a staggering 66% share of trading volume on centralized exchanges. Binance launched in 2022, when everything was going well in the crypto world and the word “bear market” was not yet in the dictionary, and it captured a 48% market share.

The market share surge comes despite a 45% drop in overall trading volume in 2022, with spot trading reaching $5.29 trillion on Binance. Nearly all of the other major exchanges lost market share last year (with the exception of ByBit), showing that Binance is eating it all out ahead of it despite capital fleeing the industry as a whole. . Second place was Coinbase, which struggled with an 8.2% share by far.

Declining market share in 2023

However, dating back to today, Binance’s market share seems to be declining.according to CC dataIn February 2023, three months after Binance captured a 66% share of trading volume, its share dropped to 57.5%. Now it’s even lower, at 43%.

The drop follows what has been a tumultuous few months for Binance, to say the least. The exchange is in the midst of an industry-wide crackdown in the US and is at odds with regulators. In February, the SEC shut down the Binance-branded stablecoin BUSD for violating securities laws (more on that here). here). BUSD was issued by New York-based Paxos. BUSD makes up more than a third of the company’s trading volume, making the coin a significant part of the exchange’s liquidity.

The regulatory troubles don’t stop there. Shortly thereafter, the Commodity Futures Trading Commission (CFTC) Paid Binance and senior executives, including CEO Changpeng Zhao, have led a “deliberately opaque common enterprise.” “Even after Binance purportedly restricts US customers from trading on its platform, Binance circumvents Binance’s compliance controls for its customers, particularly its commercially valuable US-based VIP customers,” the complaint states. He taught me how to do it the best way,” he said. The charges are weighty, including allegations that Binance “failed to implement basic compliance procedures aimed at preventing and detecting terrorist financing and money laundering.”

Chief Executive Officer Zhao was also forced to shake off concerns over the company’s lack of transparency following the FTX bankruptcy in November. Despite publicly asking for evidence of its reserve declarations, Binance’s attempts to present its financial situation to the world have fallen short, omitting debt entirely. In fact, there was not much point in proving a provision when the amount of the liability was unknown, and the market was not very responsive to its omission. Mr. Zhao’s response to why the debts were not disclosed was that “debts are more difficult” and he only “asked around” for evidence that “we owe no one.” Mothers auditors, who oversaw the reserve certification report, subsequently stopped working with Binance, citing public misunderstandings about how Binance works.

What does this mean for cryptocurrencies?

For the cryptocurrency industry, the 2022 price collapse has so far subsided in 2023, with Bitcoin up 63% year-to-date. Despite this, liquidity across the space has plummeted (let’s take a closer look at that) here), price volumes are still below the pandemic peak.

Prices are now stable, but the sector is in an intensifying battle for legitimacy in the United States. SEC Chairman Gary Gensler Accuses Industry of “Massive Non-Compliance”, Coinbase CEO Brian Armstrong Says Exchanges Could Be Forced to Move Offshore if Regulatory Environment Continues to Deteriorate (Coinbase is issued We were notified by Wells in March of possible securities law violations.)

One silver lining to all of this is that full Binance dominance is unlikely to benefit a crypto industry built on the pillars of decentralization. Binance, like it or not, has become a huge center of risk in this space given its importance to overall liquidity. If anything happens to the exchange, it will bring about a seismic shift – which is part of the reason there was so much concern towards the end of last year when Binance came under fire for its lack of transparency.

But Binance’s struggles are largely due to regulatory reasons, which affect the industry as a whole. Admittedly, the exchange has been hit harder than others by a number of complaints and allegations, but the bottom seems to be coming out from under all US-based cryptocurrency companies.

Perhaps the biggest sign of Binance’s struggles in recent months is the upcoming wave of job cuts. While many cryptocurrency companies have significantly cut their workforce over the past year, Binance claims to have kept hiring even during the recession. The company hasn’t said how many jobs it will cut, but it appears that things have changed, with reports suggesting up to 20% cuts.Chief Strategy Officer Patrick Hillman claimed to On Twitter, he said it was a reallocation of resources, not a downsizing, but also hinted at the role that regulation has played.

“Regulators in nearly every major market are also making overtime efforts to clarify expectations for industries and asset classes more broadly, putting pressure on organizations to adapt or go astray,” he said. is still at stake,” he said.

In conclusion, Binance’s hold on the number one spot may have waned, but at least for now it is still incredibly dominant, far ahead of all its competitors. Declining dominance in itself is not bad for cryptocurrencies, but what caused it—regulatory screwdrivers and lower industry-wide trading volumes—is certainly a problem. While prices may have remained flat for some time, the sector still faces many challenges.

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