Binance’s Market Share Diminish After Increased Regulatory Measures

Binance's Market Share Diminish After Increased Regulatory Measures

Binance has faced a significant setback, losing twenty-five percent of its market share recently. This decline can be attributed to ongoing investigations by US regulatory authorities, who accuse Binance of potentially violating federal laws.

Remarkably, Binance claims to operate without a physical headquarters, making its operations more decentralized.

During its peak in February, the exchange held a commanding 57.5% share of the total monthly trading volume across all crypto exchanges. However, recent data indicates a drop to 43%.

This substantial decline in market share can be attributed to multiple factors. Binance is facing fierce competition in the ever-evolving crypto landscape, leading to a tougher commercial environment for the exchange.

Furthermore, US regulators have intensified their scrutiny of Binance’s activities, casting a spotlight on potential regulatory concerns. Additionally, the conclusion of a free trading promotion has also played a role in the decline.

Could the Discontinuation of BUSD be the Reason for the Decline?

Back in February, regulators in New York took action to halt the issuance of a stablecoin associated with Binance.

Stablecoins, are digital tokens designed to maintain a stable value by tracking traditional currencies like the dollar and are commonly used as a means of preserving value during crypto market transactions.

During that time, Binance’s branded stablecoin, known as BUSD, constituted approximately 40% of the company’s monthly trading volume.

However, the discontinuation of BUSD issuance has had a notable impact on the liquidity available on the exchange.

This has added to the mounting pressure on Binance, particularly considering the negative attention the branded stablecoin received in the media and the subsequent decision to abandon it.

Ilan Solot, co-head of digital assets at Marex, a financial services group based in London, highlighted the compounding effect of BUSD’s end.  He stated that the discontinuation of BUSD issuance affected the amount of liquidity on the exchange.

The CFTC’s Lawsuit

The Commodity Futures Trading Commission, which is the US regulator for derivatives, took legal action against Binance by filing a lawsuit.

The CFTC claimed that a significant portion of Binance’s reported trading volume and profitability stemmed from actively seeking and providing access to US customers. Binance, however, expressed its disagreement with the allegations put forth by the CFTC.

Furthermore, Binance’s market share has been impacted by the conclusion of a promotional campaign that offered customers free trading on various bitcoin pairs.

This promotion contributed to the exchange’s growth towards the end of last year, but it came to an end in March. As a result, trading volume naturally decreased, affecting Binance’s immediate share of the market.

While Binance has experienced a decline in its market influence, other exchanges such as BitMex, OKX,  Bybit, etc. have managed to strengthen their market shares since March.

The Declining Shares were followed by Job Cuts

Binance’s declining market share coincides with its plans to implement a series of job cuts. The company clarified on Wednesday that these cuts were not simply a matter of downsizing, but rather a careful reassessment of whether they have the right talent and expertise in critical positions.

Binance has witnessed remarkable growth, expanding from a small team of 30 individuals to a workforce exceeding 8,000 employees. Patrick Hillmann, the chief strategy officer, referred to the job cuts as a historic operational challenge resulting from the company’s exponential growth over the past five years.

Binance did not disclose the exact number of employees who will be affected by these cuts. However, an individual familiar with the matter indicated that Binance had previously implemented cuts ranging from 5 to 12% of its workforce.