Withdrawals and volumes affected on Binance, caught between fee increases and regulation

The deletion of costs on the trading Bitcoin had boosted activity on Binance. The return of the fees made drop the volume. As for the withdrawalsscrutinized since the complaint of the CFTC, they remain moderate. Users do not flee.

Does Binance risk the bank run ? While this concern may have emerged following the complaint filed by the CFTC against the world’s leading crypto exchange, such a scenario is very far from happening to this day.

The exchange is not about to join Signature, Silicon Valley Bank or Silvergate. That’s what data compiled by analytics firm Nansen suggests. In the two days following the regulator’s complaint, Binance recorded $2.2 billion in withdrawals.

Noise, but little financial impact

However, during the same period, 1.3 billion dollars were deposited on the platform. In plain English, the net outflow is equivalent to $900 million. For Binance, this balance sheet is far from exceptional.

A Messari expert recalls that the platform posts a on-chain balance sheet of $64 billion in crypto-assets. Stablecoins account for about 50% of this total.

The procedure triggered by a U.S. regulator (the SEC is keeping silent on the matter), however, comes to halt the ambitions of Binance in the United States and its conquest of users of the former FTX.

6 billion dollars of outflows in December 2022

The impact on its customers is much less than after it stopped issuing its BUSD stablecoin in partnership with Paxos. At the end of 2022, Binance was also facing massive withdrawals due to doubts about its solvency.

The net outflow reached $6 billion, Kaiko estimated. This was twice as much as SBF’s company, FTX, had earned before the freeze on withdrawals. The competing exchange continued to operate normally.

This episode remains to this day the “worst of the crisis of confidence” experienced by the crypto market. Binance saw its market share drop sharply from 81% to 68%. A sign of its resilience, the exchange quickly recovered the lost ground.

Zero fees boosted Binance’s market share

Binance has various levers to influence the market, starting with fees. In July 2022, the giant decided to reduce fees on BTC pairs to zero. Its trading volume jumped.

Before July 8, 2022, the day zero fees were launched, the market share by volume of the 13 BTC pairs was only 25%,” Kaiko recalls in its latest report.

The effects were immediate, allowing “the exchange to increase its market share by more than 20% compared to its competitors.” Since then, Binance has therefore ended this policy in order to earn revenue again on the exchange of bitcoins.

For this strategy had a very significant cost. “By mid-March 2023, the volume of fee-free transactions accounted for the majority of the total volume, with a maximum of 66%.”

Trading volume in free fall

Five days after the fees were reinstated, its market share on the pairs had halved, moving below 30%. Fees remain zero on the BTC-TUSD pair, which now accounts for 2.8% of total volume.

The trading volume for the BTC-USDT pair, the most liquid market in crypto, has been hit the hardest, with average volumes plummeting by 90%,” Kaiko calculates.

With its fee policy, up or down, Binance has considerable leverage. Its rivals are not unaware of this.

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