Binance Market Share Drops to One-Year Low Amid Increased Regulatory Scrutiny

Blockchain data and research firm Kaiko recently reported that Binance’s market share has dropped to a one-year low amid increased regulatory scrutiny on the exchange.

Earlier this month, the US SEC slapped a lawsuit on Binance.US on 13 different accounts of violating federal securities laws. Back then, Binance’s spot trading market share remained unchanged at 56%. However, the latest data from Kaiko shows that it has now dropped to 53.7%, the lowest since August 2022.

Earlier this year on April 6, the exchange’s daily market share had also plunged to a low of 47%. This was soon after the lawsuit from the US Securities and Exchange Commission (SEC). Crypto exchanges like Binance are facing more pressure as big players from traditional finance, such as BlackRock Inc., want to enter the market and offer regulated Bitcoin exchange-traded funds.

These players are trying to attract investors who prefer dealing with regulated institutions. Alex Svanevik, chief executive officer of crypto intelligence firm Nansen, told Bloomberg:

“Centralized exchanges will find themselves in a squeeze between decentralized exchanges and traditional-finance players entering the market”.

Binance and Other Exchange Face Regulatory Heat

The report from Kaiko notes that Binance’s American affiliate Binance.US has lost almost all of its market share following the regulatory action from the SEC and the CFTC.

Another reason behind Binance’s drop in market share is the exchange halting its zero-fee promotion back in March 2023. But Binance is not the only exchange facing the heat of the regulatory onslaught.

Another US-based crypto exchange Coinbase, sued by the SEC this month, saw its market share drop to 6.8% this month from 7.6% earlier this year in January 2023.

Despite experiencing a decline in market share throughout 2023, Binance still surpasses all other crypto exchanges combined in terms of size. This gives Binance an advantage by offering a larger pool of liquidity and trading options.

Additionally, the exchange holds the largest amount of customer tokens, with reserves totaling $59.2 billion, as reported by crypto data provider DefiLlama.

Since there aren’t many reliable alternatives currently available, investors may continue to view Binance as the preferred exchange for transactions. The crypto exchange has a proven track record of providing high liquidity and market depth for trading, which helps limit the potential decrease in its market share.