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Binance‘s US arm, Binance.US, is seeing its cryptocurrencies trade at a negative premium, something the crypto community has labeled as “crypto depeg”. Bitcoin (BTC) and Ethereum (ETH), globally trading at $30,000 and $1,855 respectively, are trading at $27,650 and $1,700 on Binance.US. Investors have begun questioning whether the negative premium on Binance.US is an arbitrage opportunity or a trap.
Negative Premiums also Applicable for USDT, Alongside BTC and ETH
While major cryptocurrencies such as Bitcoin and Ethereum are trading at a negative premium, Tether (USDT) on Binance.US is also trading at $0.91 following a lawsuit opened by the U.S. Securities and Exchange Commission (SEC) and the suspension of U.S. dollar deposits and withdrawals.
However, BTC and ETH prices on Binance.US have increased by 2% as investors moved to capitalize on the arbitrage opportunity. This increase is the result of investors looking to profit from buying at lower prices and selling at higher prices on another cryptocurrency exchange. Despite seeming like a great arbitrage opportunity, only investors with U.S. dollars on Binance.US can benefit from this opportunity due to the suspension of U.S. dollar deposits for nearly a month.
The trading of various cryptocurrencies, including Bitcoin, at a negative premium on Binance.US is the result of the lawsuit initiated by SEC and increased concerns about the future of the cryptocurrency exchange due to the resignation of many senior executives last week.
Renowned Figure Warns Investors about Binance.US
Adam Cochran, partner at digital asset investment firm Cinneamhain Ventures, warned investors not to trade on Binance.US. He targeted Binance CEO Changpeng Zhao (CZ) for plunging the market into uncertainty at a time when the U.S. Department of Justice is readying to sue the exchange, saying “For all you Binance brokers who believe CZ is a god that will never let you down, you can deposit money into Binance.US and buy cryptocurrencies at a cheap price anytime you want.”
The cryptocurrency market is currently facing a severe liquidity problem as a result of regulatory pressures, and liquidity on cryptocurrency exchanges is at historic lows. Various strategies are being used to increase liquidity on global cryptocurrency exchanges like Binance and Coinbase, with significant promotions being offered.
