Is Binance’s dominance falling?

Key Takeaways

• Binance’s share of trading volume is at 48%, despite being 66% at the start of the year
• Exchange has landed in hot water over a multitude of regulatory issues, while lack of transparency has caused concern in market
• A round of layoffs is planned at the company, following in the footsteps of many companies around the industry

The world’s biggest cryptocurrency exchange dominates the landscape. At the end of last year, CCData reported that Binance’s share of trading volume on centralised exchanges was a staggering 66%. Binance began 2022, when all was well in the crypto world and the phrase “bear market” had not entered the lexicon yet, with a 48% market share. 

The surge in market share came despite overall trading volume falling 45% during the year 2022, spot trading coming in at $5.29 trillion on Binance. Nearly every other major exchange lost market share last year (with the exception of ByBit), showing that despite capital fleeing from the industry at large, Binance was eating up all before it. Second place went to Coinbase, toiling with far behind with an 8.2% share. 

Market share falling in 2023

Fast forward to today, however, and Binance’s market share seems to be falling. According to CC Data, in February 2023, three months after Binance came in at a 66% share of volume, it was down to 57.5%. Today, it is down further again, to 43%. 

The dropoff follows what has been a turbulent few months for Binance, to say the least. The exchange has found itself in hot water with regulators, right at the heart of an industry-wide crackdown in the US. In February, the SEC shut down the Binance-branded stablecoin, BUSD, over securities laws violations (deep dive on put together on that here). BUSD was issued by Paxos, a firm domiciled in New York. BUSD accounted for over a third of the company’s trading volume, the coin a vital part of the liquidity on the exchange. 

The regulatory trouble has not stopped there. Shortly after, the Commodity Futures Trading Commission (CFTC), charged Binance and high level executives, including CEO Changpeng Zhao, for leading an “intentionally opaque common enterprise”. The complaint alleges that “even after Binance purported to restrict U.S. customers from trading on its platform, Binance instructed its customers – in particular its commercially valuable…