Spot Trading Volume Shrinks
Binance, the world’s largest cryptocurrency exchange, is experiencing a significant decline in its dominance in the spot cryptocurrency market.
According to the data, Binance’s share of global spot trading volume fell to 25% in December. This level is the lowest recorded since January 2021. In November, this share was 28.5%. At its peak in 2023, Binance handled approximately 60% of global spot transactions.
Spot transactions encompass transactions where crypto assets are directly bought and sold, and ownership changes hands. In the cryptocurrency market, with a total size of approximately $3.2 trillion, spot transactions generally account for about a quarter of the total volume, with the majority of transactions concentrated in derivative products such as perpetual futures contracts.
Derivatives Market Share Also Affected
Binance is losing market share not only in the spot market but also in the derivatives market, its main source of revenue. The company’s share of the derivatives trading market has fallen from a peak of approximately 70% to around 35%. While Binance is still the world’s largest centralized exchange in both spot and derivatives trading, these declines indicate intensifying competition and a long-term structural shift.
Shifting to Offshore and On-Chain Platforms
According to research analyst Jacob Joseph, a significant portion of the trading volume shifting away from Binance is moving to offshore exchanges instead of US-based platforms. Joseph notes that exchanges like Bybit, HTX, and Gate are gradually absorbing this shift, while Coinbase has seen relatively limited gains among US platforms.
On the other hand, Binance is also under pressure from next-generation platforms that enable on-chain trading. On-chain trading platforms like Hyperliquid are shifting the balance in where and how investors trade, particularly by gaining an increasing share in derivatives trading. Joseph says this process indicates a more permanent transformation in the market structure rather than a temporary fluctuation.
US Market Dynamics and Institutional Investors
While the relatively improved regulatory environment for cryptocurrencies in the US has supported activity in American crypto markets, this has not translated into a net increase in reported trading volumes on centralized exchanges. According to CoinDesk Data, crypto transactions in the US are largely driven by institutional investors, and an increasing portion of transactions are taking place through over-the-counter (OTC) desks and non-exchange channels.
Historical Context of Market Dominance
Binance’s market dominance developed during a turbulent period for the industry. In July 2022, amidst market turmoil caused by the collapse of the TerraUSD stablecoin, Binance launched a zero-fee spot trading campaign, rapidly increasing its market share. This dominance was further solidified following the bankruptcy of rival exchange FTX, with the company’s spot market share reaching nearly 60%. Binance ended its zero-fee campaign in 2023.
Management and Regulatory Adaptations
The company is also taking steps in management and strategy to adapt to changing competitive conditions. Recently, co-founder Yi He was appointed co-CEO, marking the biggest management change since Changpeng Zhao stepped down two years ago. Zhao’s pardon by US President Donald Trump in October also eased some regulatory pressure on Binance. Analysts believe this development could facilitate Binance strengthening its operations in the US.
In addition, Binance expanded its regulatory presence in different regions by obtaining three separate licenses from the Abu Dhabi financial regulator.