How Binance became SEC’s biggest casualty

• The BTC/USD pair was trading at a premium of $234 on Binance.US.
• The exchange’s market share dropped from 20% in April to below 5% as of 12 June.

The U.S. Securities and Exchange Commission’s (SEC) legal action against Binance [BNB] has created ripples across the broader crypto market. One of the biggest victims of the entire episode has been Binance.US, the American arm of the crypto behemoth.

According to digital assets data provider Kaiko, the exchange’s market depth has shrunk by more than 76% since the SEC lawsuit filed a week ago, driven by the large-scale exodus of jittery market makers and traders.

Source: Kaiko

Liquidity crunch

Market depth is an exchange’s ability to absorb relatively large market orders without materially affecting the security’s price. Simply put, it is a measure of liquidity in the market.

After the SEC’s attempts at freezing Binance.US assets came to light, market makers, who provide the major chunk of liquidity, vacated swiftly over fears of their assets getting stuck on an exchange, much like the infamous FTX saga.

As liquidity dried up, Bitcoin [BTC] traded at a premium on the exchange when compared to other rival platforms. As per TradingView, the BTC/USD pair was trading at $26,316 on Binance.US at the time of publication, $234 more than the largest crypto exchange in the U.S., Coinbase.

Source: TradingView, BTC/USD BinanceUS

Binance.US loses market share

The latest decision by Binance.US, which suspended all forms of USD trading on the platform from 13 June, has proved to be a death knell. After the exchange asked users to withdraw their dollars before the 13 June deadline, many investors rushed to cash out their BTC, further eroding liquidity on the platform.

This also resulted in a sharp dip in trading activity on the platform. Binance.US market trading volume fell the most when compared to other trading platforms in the U.S. market. Kaiko highlighted that the exchange’s share of the pie dropped from 20% in April to below 5% as of 12 June.

Source: Kaiko

Read Bitcoin’s [BTC] Price Prediction 2023-24

Interestingly, the share of Coinbase soared from 46% to 64% over the past week, with no reasonable explanation. However, Kaiko’s analysis predicted that it might be the biggest loser at the end of its all, considering 80% of its business was concentrated in the U.S. market.

Coinbase has been attempting to expand into other markets in order to overcome the headwinds in the US crypto scene. CEO Brian Armstrong previously said that relocating the exchange’s headquarters to the United Kingdom is “on the table” if the regulatory situation in the United States does not improve.