- Despite the outflow, liquidity on the stock exchange was not significantly affected.
- Binance’s troubles allowed entities like Bybit and Coinbase to expand their market.
One of the largest Web3 ecosystems, Binance [BNB]resolved its legal disputes with the US government last week by agreeing to pay a $4 billion fine and taking measures to improve compliance with local laws.
The event also resulted in the departure of former CEO and one of the most popular faces in the industry: Changpeng Zhao (CZ).
While these events caused panic, there was no evidence of a damaging impact on the market’s short-term prospects at the time of publication.
In fact, the market is better than Bitcoin [BTC] has scaled the $38,000 level since these developments became public, AMBCrypto noted CoinMarketCaps facts.
The continuation of bullish momentum implied that the market’s most anticipated event – the approval of spot Bitcoin ETF applications by the US Securities and Exchange Commission (SEC) – was not in jeopardy. This was recently illustrated in a report by crypto market data provider Kaiko.
Binance seems fine
As for Binance’s own empire, the crypto giant witnessed an exodus of funds when the news became public.
According to AMBCrypto’s examination of DeFiLlama data, $2.74 billion in net outflows have been recorded since November 20. This was the day news of the resolution was first reported by Bloomberg.
Source: DeFiLlama
However, this did not in any way result in an acute liquidity shortage on Binance, according to the evidence provided by Kaiko. Spreads for the exchange’s top BTC pairs have fallen significantly after spiking in the early days of delivery.
Source: Kaiko
As you might expect, an exchange rate spread is the difference between the price the seller asks and what the buyer is willing to pay. Typically, an asset with high liquidity has a lower spread and vice versa.
Smaller players are emerging, but Binance is still the king of the market
As the world’s largest crypto trading platform, even a normal drop in Binance’s market share could create big opportunities for some of the smaller players. This is exactly what happened.
What seemed like a small change of 4% for Binance resulted in a massive 50% increase in Bybit’s stock, and 34% for Coinbase.
As shown below, Bybit made market share gains in all UTC hours and emerged as the biggest beneficiary of Binance’s troubles. Ironically, the largest crypto exchange in the US, Coinbase, recorded a higher market share during trading hours outside the US.
“All told, Binance has ceded some market share to Coinbase in non-US hours and to Bybit across the board,” Kaiko noted in the report.
Source: Kaiko
It was reasonable to conclude that the events of the previous week have strengthened competitiveness in the centralized crypto trading market. But not nearly enough to challenge Binance’s dominance.
BNB receives timid responses from traders
The ecosystem’s own cryptocurrency, BNB, took a major hit as a result of the episode. At the time of writing, the fourth largest crypto asset was trading $228.94still more than 12% lower than pre-settlement levels.
AMBCrypto analyzed BNB’s price chart using CoinMarketCap and found a significant drop in trading volumes over the past 10 days. The slowdown in trading activity indicated continued investor skepticism.
Source: CoinMarketCap
The developments also had consequences for BNB’s derivatives market. Open Interest (OI) in BNB futures fell after an initial peak, data retrieved by AMBCrypto from Coinglass shows.
Source: Coinglass
The initial increase was more short positions being opened. In fact, the number of bullish leveraged positions has lagged behind bearish positions for most of the past few days.
Source: Coinglass
However, when the price of BNB started to fall, traders who were betting on further declines abandoned their plans. If BNB starts to consolidate around current levels, a further decline in OI could be on the cards.
Binance marches on
Meanwhile, leaving the past behind, Binance announced a major deal that could bridge traditional finance with the crypto market.
How many Worth 1,10,100 BNBs today?
Named the world’s first three-party settlement for cryptocurrency, Binance’s institutional clients could hold collateral with an external bank in the form of fiat equivalents such as treasury bills.
The collateral would provide additional yield-generating income for institutional investors.
