In the aftermath of Binance’s recent settlement with the U.S. Department of Justice, two major players have emerged as the apparent victors in the crypto exchange landscape. According to a report from Kaiko, Coinbase and Bybit are enjoying newfound prominence, while the fate of Binance remains uncertain.
Binance’s Regulatory Settlement
The settlement, which saw Binance agreeing to a hefty $4 billion penalty, the retention of an independent compliance monitor for three years, and an overhaul of its AML/KYC programs, also involved agreements with the CFTC, FinCEN, and OFAC.
Notably absent from the resolution was the SEC’s ongoing lawsuit against Binance and its U.S. arm. The Wall Street Journal reported that the SEC is actively investigating whether Binance executives had backdoor access to customer funds, keeping the legal cloud over the exchange.
With Binance facing regulatory scrutiny, speculation is rife about the implications for a potential spot Bitcoin ETF and which exchanges stand to benefit from the fallout. COIN, DYDX, and UNI have all experienced a rally following the settlement, prompting industry watchers to assess the landscape for potential winners.
In terms of ETF prospects, an analysis of BTC volumes and the SEC’s historical decisions suggests that the settlement may not significantly impact the likelihood of approval. The SEC has previously emphasized the need for a surveillance sharing agreement with a market of significant size, making the fate of a BTC ETF uncertain despite Binance’s settlement.
Turning the spotlight on Binance itself, despite significant outflows, there’s limited evidence of a mass exodus from the exchange based on liquidity data. Market depth has actually increased since news of the settlement broke, with only minor disturbances in spreads for top BTC instruments.
The only cause for concern arose when TUSD experienced a rapid depegging down to 0.995 Tether, attributed in part to a massive $3 million market sell order. Some speculated a connection to Tron being used in terror financing, but it appears the swift sell-off was triggered by the conclusion of Binance’s Memecoin “Launchpool” on November 26.
Coinbase & Bybit Gain Traction
In the aftermath, Coinbase has emerged as a strong performer, with its stock gaining a remarkable 75% in a single month. The prevailing narrative suggests that Coinbase is poised to benefit from improving market conditions as the bear market potentially recedes.
Examining market share trends, Bybit stands out as the immediate winner, consistently gaining market share in every hour, growing by more than 20% in 16 out of 24 hours. Coinbase, on the other hand, experienced significant growth outside of U.S. trading hours, particularly in Europe and Asia.
Despite Coinbase’s gains, Binance remains the leader in liquidity for both BTC and altcoins, with Bybit quietly improving its liquidity over the past year. While early trends appear positive for Coinbase and Bybit, Binance’s resilience is evident in its ongoing leadership in liquidity.
As the crypto exchange competition unfolds, a recent development adds an intriguing twist – Coinbase’s revelation to customers of a subpoena from the CFTC related to Bybit. While theories abound that Binance may lose market share, the compliance monitor and enhanced AML/KYC procedures could potentially bolster trust in the exchange, maintaining its standing in the market.
In the evolving saga, it seems that a positive outcome may be in store for all parties involved: the U.S. government secures a win, Binance can continue operations with increased compliance, and other exchanges have the opportunity to grow in the shifting landscape of the cryptocurrency market.
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