Binance, the leading cryptocurrency exchange, has lost a significant portion of its trading volume market share over the past two weeks following a lawsuit by the United States Commodities Futures Trading Commission (CFTC) and its decision to halt some zero-fee trading.
According to the blockchain analytics platform, Kaiko, Binance’s market share of trade volume dropped by 16%, standing at 54% by the end of Q1. The CFTC sued Binance on March 27, accusing the exchange of violating derivatives laws by offering trading to US customers without registering with market regulators.
Although Binance still leads in volume compared to its competitors, the exchange’s March 15 decision to end zero-fee spot and margin trading for 13 trading pairs, including BNB, Bitcoin, and Ether with multiple fiat currencies and stablecoins, caused a loss in trading volume. Kaiko noted that Binance’s excess volume mostly disappeared with the end of zero-fee trading, leading to an even distribution in market share among the remaining exchanges.
According to Kaiko’s report, Binance’s market share in trading volume fell from 65% to 54% during the first quarter of 2023. However, its US arm Binance.US tripled its market share from 8% to 24%, helping to offset some of the losses elsewhere. The exchange largely maintained its derivatives dominance, only giving up 2% of its market share. The fall in trading volume was largely attributed to the end of zero-fee spot trading rather than the CFTC lawsuit, which suggests that most of the market share was lost due to this factor alone.
Prior to the FTX fiasco in November 2022, Binance’s market share was 50%, while OKX’s market share stayed below 10%. After the incident, Binance’s market share rose to 65% and OKX’s rose to 17%. Bybit and the other smaller exchanges, Huobi, Bitmex, and Deribit all saw a decline in their market shares.
Overall, Binance was able to minimize the losses of its market share due in part to the success of Binance.US. However, it remains to be seen if their derivatives dominance can remain stable or if further losses will be incurred during the coming quarters.
In the last quarter, Upbit was the only crypto exchange to have reclaimed a “significant share” of trading volume according to an analysis from Kaiko. This trend is largely attributed to recent regulatory pressures and banking crises, as well as the catastrophic collapse of FTX. As a result, Bitcoin and Ether transfers were removed from centralized exchanges in record numbers.
Furthermore, daily trading volumes on decentralized perpetual exchanges rose to $5 billion in November 2022 — the highest since the Terra Luna Classic (LUNC) and its associated TerraClassicUSD (USTC) stablecoin collapsed in May 2022. Uniswap has now become a rival for crypto exchanges Coinbase and OKX, although its trading volumes remain a fraction of those processed by Binance.
