A Volume-Boosting Tactic? Binance Contacts Lesser-Known Crypto Projects

A Volume-Boosting Tactic? Binance Contacts Lesser-Known Crypto Projects

Time Stamp: August 25, 2023 9:56 AM
Source Node: 2846404

Binance,
the largest cryptocurrency exchange in the world by trading volume, in the past
week has been reaching out to digital asset projects on its
platform with
smaller market capitalization and low-liquidity tokens.

According
to The Block, which first reported the news, the exchange has been asking about
the market makers associated with these projects. Binance is also asking if the
projects would be open to allocating up to 5% of their circulating tokens into
its savings pools in exchange for interest earnings.

While the
move appears to be targeted at boosting trading volumes on Binance, a
spokesperson from the exchange told CoinDesk the move is part of the exchange’s
“ongoing risk management initiative.” “These projects have relatively lower
market liquidity trading pairs and/or a smaller market capitalization, which
potentially exposes users to risk, including potential market manipulation,”
the spokesperson said.

In other words, Binance
sees the move as a way for the crypto projects “to enhance their liquidity
protection.” Furthermore, the
spokesperson emphasized that the call for participation in its saving
pool is optional, The Block reported.

Unverified
screenshots of what appears to be the line of communication between Binance’s agents and
the smaller crypto projects have also emerged on social media.

Lower Volatility Hits
Crypto

Binance’s
recent efforts come to light as the crypto spot and derivatives market share of
the exchange fell for the fifth
consecutive month in July to 40.4%, according to data from CCData, a digital
assets data provider. On the contrary, exchanges such as Huobi, DigiFinex
and KuCoin, have seen their market
share grow by 6%, 3.5%
and 1.3%, respectively, since January 2023.

In July,
the crypto industry continued to suffer a
lack of volatility, with spot and derivatives trading volumes going down by 10.5% and
12.7% to $515 billion and $1.85 trillion, respectively. In addition, the
total volumes of crypto spot and derivatives traded on centralized exchanges such as Binance and Coinbase declined by 12% in July, hitting $2.36 trillion. This marked the lowest
monthly trading activity, year to date.

With $208
billion in total spot trading volume, Binance remains the biggest crypto
exchange in the world. However, Upbit, a South Korea-based crypto, last month beat top exchanges such
as OKX and Coinbase to emerge as the second-largest exchange by trading volume after
Binance.

Specifically, Upbit’s
spot trading volume in July jumped by 42.3% to $29.8 billion. On the contrary,
OKX and Coinbase saw their volumes descend to $28.6 billion and $29
billion, respectively, Finance Magnates reported.

The fall in
Binance’s market share has persisted in recent months as the cryptocurrency
exchange faces ongoing regulatory challenges
in multiple regions, notably in the United States where federal authorities are considering filing
criminal charges against the platform. Already, Binance is contending
with civil lawsuits initiated by the Securities and
Exchange Commission (SEC) and the Commodity Futures
Trading Commission (CFTC).

Binance,
the largest cryptocurrency exchange in the world by trading volume, in the past
week has been reaching out to digital asset projects on its
platform with
smaller market capitalization and low-liquidity tokens.

According
to The Block, which first reported the news, the exchange has been asking about
the market makers associated with these projects. Binance is also asking if the
projects would be open to allocating up to 5% of their circulating tokens into
its savings pools in exchange for interest earnings.

While the
move appears to be targeted at boosting trading volumes on Binance, a
spokesperson from the exchange told CoinDesk the move is part of the exchange’s
“ongoing risk management initiative.” “These projects have relatively lower
market liquidity trading pairs and/or a smaller market capitalization, which
potentially exposes users to risk, including potential market manipulation,”
the spokesperson said.

In other words, Binance
sees the move as a way for the crypto projects “to enhance their liquidity
protection.” Furthermore, the
spokesperson emphasized that the call for participation in its saving
pool is optional, The Block reported.

Unverified
screenshots of what appears to be the line of communication between Binance’s agents and
the smaller crypto projects have also emerged on social media.

Lower Volatility Hits
Crypto

Binance’s
recent efforts come to light as the crypto spot and derivatives market share of
the exchange fell for the fifth
consecutive month in July to 40.4%, according to data from CCData, a digital
assets data provider. On the contrary, exchanges such as Huobi, DigiFinex
and KuCoin, have seen their market
share grow by 6%, 3.5%
and 1.3%, respectively, since January 2023.

In July,
the crypto industry continued to suffer a
lack of volatility, with spot and derivatives trading volumes going down by 10.5% and
12.7% to $515 billion and $1.85 trillion, respectively. In addition, the
total volumes of crypto spot and derivatives traded on centralized exchanges such as Binance and Coinbase declined by 12% in July, hitting $2.36 trillion. This marked the lowest
monthly trading activity, year to date.

With $208
billion in total spot trading volume, Binance remains the biggest crypto
exchange in the world. However, Upbit, a South Korea-based crypto, last month beat top exchanges such
as OKX and Coinbase to emerge as the second-largest exchange by trading volume after
Binance.

Specifically, Upbit’s
spot trading volume in July jumped by 42.3% to $29.8 billion. On the contrary,
OKX and Coinbase saw their volumes descend to $28.6 billion and $29
billion, respectively, Finance Magnates reported.

The fall in
Binance’s market share has persisted in recent months as the cryptocurrency
exchange faces ongoing regulatory challenges
in multiple regions, notably in the United States where federal authorities are considering filing
criminal charges against the platform. Already, Binance is contending
with civil lawsuits initiated by the Securities and
Exchange Commission (SEC) and the Commodity Futures
Trading Commission (CFTC).

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