Following a lawsuit from the US commodities regulator and its decision to stop some zero-fee trading, Binance's dominance in terms of trading volume market share has decreased over the last two weeks.
Blockchain analytics platform Kaiko stated in a newsletter dated April 4 that Binance "lost 16% market share of trade volume," bringing its market share to 54% as of the close of Q1.
On March 27, the U.S. Commodity Futures Trading Commission filed a lawsuit against Binance, claiming that by providing trading to customers in the United States without first registering with market regulators, Binance had flouted regulatory compliance and broken derivatives laws.
Despite losing trading volume, Kaiko claimed that Binance continues to process more traffic than all of its rivals combined. On March 15, Binance decided to discontinue zero-fee spot and margin trading for 13 trading pairs, including BNB and ETH with various fiat currencies and stablecoins.
With the end of zero-fee trading, "overall, Binance's excess volume largely vanished, which was reflected in an even dispersion in market share among the remaining exchanges,"
Kaiko said that part of this decline was mitigated by the company's U.S. subsidiary, Binance.US, which over the course of the quarter tripled its market position from 8% to 24%.
However, Binance didn't decline significantly across the board. With only a 2% market share loss over the previous quarter, the exchange was able to largely retain its dominance in the derivatives market.
Kaiko clarified that, as opposed to the CFTC lawsuit, the termination of zero-fee spot trading had a greater impact on the decline in trading volume figures:
“The trend is quite different when looking at derivatives volumes: Binance only lost about 2% of market share for perpetual futures trade volume. This suggests that the majority of market share was lost purely due to the end of zero-fee spot trading, rather than trepidations around a lawsuit.”
Following Binance's status as one of the "big winners" of the FTX debacle, which saw its market share in trading activity increase to 65% during the final quarter of 2022, the market share has since fallen to 54%:
“Binance’s market share increased from 50% to 65% after November 2022, while OKX saw its market share increase from under 10% to 17%. Bybit and the three smaller exchanges Huobi, Bitmex and Deribit, on the other hand, saw their market share decline.”
Out of the 17 trading platforms that Kaiko analysed over the past quarter, Upbit was the only cryptocurrency exchange to regain a "significant share" of trading traffic.
Numerous reports have noted a growing tendency towards decentralised alternatives and self-custody wallets in view of recent regulatory pressures, the banking crises, and the catastrophic collapse of FTX.
Following the demise of FTX, high numbers of bitcoin and ether users switched to decentralised exchanges. Additionally, in November 2022, the daily trading volume of decentralised perpetual exchanges surpassed $5 billion, which was a record since the fall of Terra Luna Classic (LUNC) and the associated TerraClassicUSD (USTC) stablecoin in May 2022.
The decentralised exchange Uniswap's trading numbers are now comparable to those of Coinbase and OKX, but they still pale in comparison to Binance's.