Bitcoin (BTC) and other digital assets, such as Tether (USDT), are currently being traded at an 8% discount on Binance.US, a popular cryptocurrency exchange. This situation can be attributed to liquidity issues that have arisen on the platform following a lawsuit filed by the U.S. Securities and Exchange Commission (SEC).
According to data from Binance.US, BTC is currently trading at $27,705.59, which is approximately $3000 less than its price on rival platforms like Coinbase, Kraken, BitStamp, and others. This discount is also evident in the trading prices of other digital assets, including Ethereum (ETH), USDT, Solana (SOL), and more, as indicated by Coingecko data.
Effects of Lawsuit on Binance.US Market Depth and Reputation
Since the SEC filed a lawsuit against Binance.US on June 5, the platform has experienced a significant decline in market depth, reaching almost 80%. This decline can be attributed to market makers exiting the platform due to the legal troubles faced by the exchange.
In response to the lawsuit and the resulting liquidity issues, Binance.US made the decision to discontinue U.S. dollar deposits. This decision was prompted by the abrupt halt of payment channels by their banking partners, forcing the exchange to transition to a crypto-only platform. As a result, the reputation of Binance.US was greatly affected, with its market share dropping to less than 1%, according to blockchain analytical firm Kaiko.
The volatility of USD pairs on the exchange has been particularly high since these events unfolded. For example, BTC saw a significant spike, reaching as high as $138,000 on June 21. Prior to this, Bitcoin had been trading at a 3% discount in May.
Meanwhile, assets paired with stablecoins like USDT and USDC have not been affected by the discount. Coingecko data shows that these assets continue to trade at regular prices.
Tether’s Chief Technical Officer (CTO), Paolo Ardoino, addressed concerns regarding the deviation of USDT from its dollar peg. He clarified that this deviation is specific to Binance.US, where a general -8% spread seems to impact all cryptocurrencies on the platform. Ardoino attributed this situation to the legal challenges faced by Binance.US, which have likely discouraged market makers from engaging in arbitrage at this time. He noted that on Binance.com, USDT is actually trading 1 basis point above the dollar.
Ardoino emphasized that Tether is responsible for its primary market, which is tether.to, while the role of arbitrageurs and market-making professionals is to handle market making in secondary markets, such as crypto exchanges.
The ongoing legal challenges faced by Binance.US have resulted in liquidity issues on the platform, leading to discounted trading prices for Bitcoin and other digital assets. Market makers have exited the platform, causing a significant decline in market depth. However, assets paired with stablecoins have remained unaffected by this discount. It remains to be seen how Binance.US will navigate these challenges and restore its market share in the future.