Binance Market Share Drops By 16%

Despite the recent negative headlines, the crypto market closed the quarter as one of the best-performing sectors in finance. Bitcoin, which has gained 70% year-to-date, was the leader, benefiting from bullish narratives stemming from the banking sector crisis combined with low liquidity.

The past two weeks have been particularly turbulent for the cryptocurrency market. Binance lost 16% of its market share of trade volume following a lawsuit by the U.S. Commodity Futures Trading Commission (CFTC) and the decision to end its zero-fee trading program. The exchange still maintains a 54% dominance but has seen a dispersion in market share among the remaining exchanges following the end of its zero-fee trading program.

Regulatory Pressure

The US market is particularly fragile right now, with growing pressure among the remaining exchanges. Bittrex announced that it would be shuttering its US operations due to an uncertain regulatory outlook. Even Coinbase, which has historically made very strong efforts with regulators, received a Wells Notice focused on its staking service while Kraken was forced to shut down its service earlier this year. Coinbase’s market share dropped from a weekly average of 60% to just 49% throughout Q1, with Binance.US largely picking up the slack despite a lawsuit against the global entity. Its market share has tripled from just 8% to more than 24%.

Despite the regulatory crackdown on global exchanges, trade volume continued to soar and hit 4-month highs in mid-March, remaining at consistently high levels amid a wider market rally. However, volumes began to drop sharply after Binance shut down its zero-fee program.


Uncertain Market Dynamics

In the Layer 1 and Layer 2 baskets, a few tokens enjoyed outsized returns. Solana (SOL) in the L1 basket erased most of its post-FTX losses with gains of +100% YTD after the network showed signs of stability and decentralization. In the Layer 2 sector, Optimism (OP) hit all-time highs in February, a month before the launch of its competitor Arbitrum’s ARB token. In the DeFi sector, Lido’s LDO token was the winner as traders flocked to decentralized staking services ahead of Ethereum’s upcoming Shanghai upgrade and a wider crackdown on centralized services in the US.

The U.S. government’s recent sale of 9,861 BTC connected to Silk Road, with plans to sell more, did not significantly impact the market, and Bitcoin closed the week slightly up. Despite the ongoing regulatory crackdown and banking crisis that have upended the crypto market structure, there remains an uncertain dynamic among the world’s largest exchanges. However, the market continues to show resilience, and Bitcoin’s YTD gains are a testament to its continued popularity among investors.