Binance Promotes Liquidity Boost
In a move to bolster liquidity and mitigate potential risks, Binance has begun reaching out to crypto projects with low-liquidity tokens trading on its platform. The exchange has asked these projects to consider taking steps to enhance their trading environment, including collaborating with market makers and contributing to Binance’s savings products.
Binance has contacted several low-cap projects with low liquidity on the platform over the past week, asking for details of the market-making relationships and whether they are considering putting 1-5% of their circulating tokens into Binance Savings product. Binance stated that…
— Wu Blockchain (@WuBlockchain) August 25, 2023
Liquidity Drive
Over the past week, Binance staff have been communicating with multiple crypto projects, requesting information about their relationships with market makers and encouraging them to allocate 1-5% of their circulating tokens to Binance’s savings accounts. This allocation would allow these projects to earn interest while simultaneously increasing liquidity on the exchange.
Screenshots of the outreach messages have circulated on social media platforms like Twitter, sparking discussions among the cryptocurrency community. Binance’s spokesperson clarified that this initiative is aimed at projects with tokens featuring lower-liquidity trading pairs or smaller market capitalizations relative to the broader market. These characteristics could expose users to risks such as potential market manipulation.
Binance emphasized that the primary goal of this risk management outreach is to guide project teams towards adopting recommended measures to safeguard liquidity. Engaging with market maker support is one approach to achieving this, as market makers are essential liquidity providers who help ensure smooth trading operations on exchanges. The spokesperson also highlighted that making contributions to savings pools, like Binance Savings, is another optional way for projects to enhance liquidity protection.
Binance’s Savings Offerings
Binance’s savings products offer rewards to users and projects for locking up tokens for a specific period, with interest rates varying based on the chosen term. However, the spokesperson acknowledged that such offerings have faced scrutiny in the wake of regulatory concerns triggered by the collapses of lending platforms like BlockFi, Celsius, and Voyager Digital.
This outreach coincides with Binance’s ongoing efforts to address regulatory challenges, as both the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have levied charges against the exchange and its founder, Changpeng Zhao, this year. These charges encompass a range of alleged violations, including market manipulation and improper asset location disclosure.
Read More: Binance Card Phased Out In Latin America And Middle East
According to Matt Batsinelas, founder of Glass Markets, several exchanges, including Binance, have recently taken steps to gain better oversight of market makers’ behavior. This move is seen as positive by experts, as monitoring market makers ensures a more secure trading environment. Binance’s spokesperson underscored that the exchange’s focus remains on safeguarding users by prioritizing digital assets of high quality. They reiterated that monitoring liquidity and market capitalization are key criteria that Binance employs to maintain a secure trading atmosphere.
