In recent days, the recovery in the cryptocurrency market following challenges such as the collapse of the FTX exchange has revitalized the industry. Despite this revival, the market share of the giant cryptocurrency exchange Binance, which was measured at 74% in December 2022, has dropped to 50%.
Risks Surrounding Binance
The recent increase in the prices of Bitcoin and altcoins, the collapse of FTX, which was once the second largest cryptocurrency exchange, regulatory reviews, and the impact of numerous bankruptcies have brought new life and enthusiasm to the industry. Many cryptocurrency companies that attracted significant investors with astonishing valuations in 2021-2022 have remained noticeably silent for most of this year.
Although the temporary rise in Bitcoin’s price to over $35,000 and the surge of many altcoins to unseen levels since June brought relief to market participants, there is no relief for Binance. According to data compiled by The Block, Binance’s market share, which was 74% in December 2022 among cryptocurrency exchanges that do not support US dollars, has dropped to 50% this month.
There are many reasons supporting the decline in Binance’s market share, with the most prominent being the pressure imposed by regulators in different regions of the world. As a result of this pressure, at least 16 top-level executives, including Jonathan Farnell, the president of Binance UK, Brian Shroder from Binance.US, and Sidney Majalya, the former Chief Risk Officer of the cryptocurrency exchange, have resigned. Observers emphasize that these resignations and the changes occurring at various levels of the cryptocurrency exchange are just the beginning.
Binance is currently facing serious lawsuits brought by both the US Commodity Futures Trading Commission (CFTC) and the US Securities and Exchange Commission (SEC).
The Most Significant Decline in Binance’s Market Share was Seen on October 23
All of these developments have led many trading firms to reduce their trading activities on the cryptocurrency exchange. The decline in Binance’s market share is particularly due to the withdrawal of institutional companies from the cryptocurrency exchange. The nature of High-Frequency Traders (HFT) trading style generates large volumes, and the potential risks surrounding Binance have led most institutional traders to distance themselves from the cryptocurrency exchange.
The withdrawal among institutional traders at Binance was particularly evident on October 23. According to Kaiko’s data, while the price of Bitcoin was rising, the cryptocurrency exchange’s market share dropped below 50%, which coincided with Bitcoin’s price reaching $35,000. In contrast, the market share of rival cryptocurrency exchange OKX surpassed 50% during the day.
