Binance.US, the U.S. arm of popular cryptocurrency exchange Binance, has experienced a significant decline in market depth as market makers and traders flee the platform in response to the recent U.S. Securities and Exchange Commission (SEC) lawsuit.
The lawsuit, which alleges multiple securities violations, has had a profound impact on Binance.US’s liquidity and market share.
- Plummeting Market Depth: Binance.US has witnessed a rapid decline in market depth, with liquidity dropping by 76% within just one week after the SEC lawsuit. The aggregated market depth for 17 tokens on Binance.US, as reported by Kaiko, decreased from $34 million on June 4 to $7 million on Monday.
- Decreased Market Share: Binance.US’s market share in the U.S. market also suffered a significant blow, plummeting from 20% in April to 4.8% in June. This decline underscores the erosion of confidence among traders and investors following the SEC’s legal action.
- Impact on Binance Global: The SEC lawsuit against Binance has not only affected Binance.US but also had repercussions for Binance Global. The global platform experienced a 7% drop in market depth since the beginning of June, indicating the broader consequences of the regulatory scrutiny faced by Binance.
- Market Maker Nervousness: The decline in liquidity suggests that market makers are becoming increasingly cautious and aim to avoid losses due to market volatility. They are also concerned about the possibility of their assets being trapped on an exchange, similar to the collapse experienced by FTX.
- Coinbase’s Liquidity Drop: Binance.US is not the only exchange affected by the SEC lawsuit. Coinbase, another U.S.-based exchange that faced legal action from the SEC, saw a 16% decrease in liquidity during the same period.
- Coinbase’s Market Share Increase: Interestingly, while Binance.US’s market share declined, Coinbase’s market share increased from 46% to 64% over the past week. The reasons for this shift remain unclear, as highlighted by Kaiko’s report.