Binance US, the American arm of the world’s leading cryptocurrency exchange, has been navigating a challenging period characterized by significant customer withdrawals and a sharp drop in trading volumes over the past few months. Market data provider Kaiko reports that weekly trade volumes on the platform have plummeted to just $40 million, representing a staggering 99% decrease from the nearly $5 billion recorded in March when the cryptocurrency market showed signs of resurgence. Here are three key factors contributing to this dramatic decline:
The SEC Lawsuit:
The decline in weekly trade volume began in May but escalated significantly following the legal action taken by the US Securities and Exchange Commission (SEC) against Binance, its CEO Changpeng Zhao (CZ), and its American subsidiary, Binance US. The SEC’s allegations include violations of securities laws, including self-dealing, market manipulation, and the sale/offering of multiple unregistered securities, such as BNB and BUSD.
As a result of the lawsuit, the SEC imposed a restraining order on Binance US, freezing its assets. In response, the platform delisted over 100 trading pairs, including popular ones like BCH/BTC, BCH/USDT, DOT/BTC, XTZ/BTC, AAVE/USDT, COMP/USDT, and EOS/USDT. It’s important to note that Binance and Binance US are not the only crypto organizations facing legal challenges from the SEC, as the watchdog has also sued Coinbase over alleged trading of unregistered securities like ADA, SOL, MATIC, among others.
Market Momentum Slump:
Another contributing factor to the decline in Binance US’s weekly trade volume could be the overall performance of the cryptocurrency market, which was thriving until mid-August but experienced a sharp downturn afterward. Bitcoin, for instance, was trading around $29,000 on August 16 but saw its price dip below $26,000 shortly thereafter. A similar pattern of volatility was observed in altcoins like ETH, XRP, DOGE, SHIB, and others. The market’s sharp declines may have dampened investor enthusiasm, leading to reduced trading activity on the platform.
Persistent Fear, Uncertainty, and Doubt (FUD):
Fear, Uncertainty, and Doubt, commonly referred to as FUD, may also be a factor driving investors away. Binance and its US subsidiary have been the subjects of unverified news reports and rumors that have cast doubt on their credibility and reputation. CEO Changpeng Zhao has been actively refuting these rumors on social media, urging followers on Twitter to disregard media propaganda and misleading information.
CZ believes that the persistence of FUD and external pressures have actually strengthened the Binance community’s resolve, stating, “This, in turn, makes us more determined to drive towards our mission, to increase the freedom of money for people all around the world.”
In light of these multifaceted challenges, Binance US faces the task of rebuilding trust, navigating regulatory scrutiny, and adapting to the evolving dynamics of the cryptocurrency market in order to regain its previous levels of trading activity and customer engagement.
