Will Binance Lose Its Position As The Top Crypto Exchange?

Despite all the recent fear and uncertainty surrounding Binance’s operations in the United States, on a global scale, they are by far the most prominent crypto exchange. Despite the recent regulatory overreaches in the States, which has seen Binance, Coinbase, and Kraken all face the disjointed, puzzling, and incoherent wrath of SEC chair Gary Gensler, some cryptocurrency traders remain optimistic. However, the reality is that it’ll be near impossible for the industry to expand while having the world’s most powerful economic superpower breathing down its neck. 

Will Cryptocurrency Survive This Onslaught?

Tomorrow isn’t promised to anybody, especially in the cruel and unbelievably volatile world of cryptocurrency trading, which has seen people lose considerable portions of their money. However, the world is much bigger than the United States. Although it is still the dominant economic superpower, many economists and analysts believe this grip is starting to loosen. Many believe that by 2030, China will have become the dominant economic superpower, and other countries may soon follow suit. 

Regulation in America is becoming a significant stumbling block, causing many innovative projects to either avoid setting up in the United States or, for the already established ones, move their base to more cryptocurrency-friendly countries. The SEC’s draconian regulation and zero-tolerance approach will likely be unsuccessful in the long run. In real-time, we’re already witnessing the consequences of these actions.

The Importance of Regulation

Regulators have shown that they can control industries correctly and fairly, such as the gambling industry, so its draconian approach to cryptocurrency is fragmented, to say the least. Casino companies are now thriving, and digital casinos are bringing in tens of billions of dollars annually for several different tax bases spread across the US. Innovation in the casino industry continues to move forward regardless. Crypto craps for real money represent the latest addition to a burgeoning sector, where you can gamble on the popular dice game using your digital assets, with many people preferring this because of its greater convenience and safety. 

Regulation is crucial, and an unregulated market is just as dangerous to an economy as an overly regulated one, but for different reasons. The cryptocurrency sector hasn’t fallen into the same favor as many other industries, which have been appropriately controlled and allowed to flourish in the United States. The cryptocurrency sector is moving at a much faster pace than American regulators. Countries like the United Arab Emirates and the United Kingdom are light years ahead with cryptocurrency innovation and harnessing growth.

Market Dominance

Other cryptocurrency exchanges, such as Coinbase, have existed longer than Binance. Coinbase launched in 2012, and Binance launched five years later in 2017. It might not sound like a long time but in a 24/7 market like cryptocurrency, which is subject to extreme price volatility. In this period, which stretches just a little longer than a decade, multiple exchanges have risen from the ashes and collapsed, the most notable being FTX, where investors lost billions of dollars.

However, compared to Binance, FTX was a drop in the ocean and still had billions of dollars worth of cryptocurrency on its balance sheets. This should give you some indication as to how big Binance is as a standalone entity. Changpeng Zao, the founder of Binance, is a vocal user of social media, often connecting with members of the cryptocurrency directly via his Twitter account. Binance’s rise to the industry’s zenith was helped immeasurably when it created a native token, which became the primary way to buy and sell smaller capped cryptocurrencies. 

During the bull run of 2021, the native token (BNB) surged in price from less than $10 to over $500, and with so much of this on the Binance balance sheet, it resulted in complete market dominance. Based on 24-hour volume, Binance is a larger exchange than all of the other nine exchanges in the top 10 combined, and some have argued that they’re such a prominent market leader that they’re monopolizing the sector.

Other Exchanges In Line To Take Over?

If the SEC action against Binance is set to cause uncertainty for the exchange, Coinbase should also be worried. Coinbase is the second largest exchange but is facing the same sort of incoherent accusations from SEC chair Gary Gensler, whose initial action against the multi-billion-dollar publicly traded company is already under threat given that Coinbase was allowed to go public back in 2021. 

As Binance controls over 70% of the market volume, and its primary operations stem from Dubai and other cryptocurrency-friendly countries, this recent action will be more of a hindrance. Changpeng won’t be concerned their market dominance is under threat. Despite the threat to freeze US users’ assets, this makes up less than 5% of their overall activity, so Changpeng and Binance will look outward toward the world instead of getting into an expensive legal battle with the SEC. 

Unless Binance completely collapses, it won’t lose its position as the top exchange. If it does collapse, that will signal total market capitulation and likely lead to the demise of other exchanges due to market contagion.