In a turbulent week for the cryptocurrency market, major exchanges Binance and Coinbase found themselves in the crosshairs of the U.S. SEC. Amidst the chaos, liquidity has taken a hit, particularly for Binance.US. As a result, a wave of volatility and altcoin sell-off ensued, leaving investors and traders on edge.
Market makers and traders have abandoned Binance.US in droves following the SEC lawsuit. According to Kaiko research, aggregated market depth for 17 tokens on the exchange has plummeted by nearly 80% over the past week.
On June 4, just before the SEC lawsuit, the market depth stood at $34 million. Presently, it has dwindled to a mere $7 million.
Coinbase and the global Binance exchange have also experienced declines in liquidity since the lawsuits were filed. Coinbase’s liquidity has dropped by approximately 16%, while Binance has witnessed a decrease of around 7% since the beginning of June.
Notably, Binance’s market depth initially remained stable and even increased shortly after the lawsuit but declined over the weekend due to altcoin sell-offs.
The decline in liquidity serves as an indication that market makers are wary of potential losses resulting from heightened volatility. Additionally, the fear of encountering a situation similar to the collapse of FTX has led them to withdraw assets from Binance.US.
Binance.US Hit Hardest As Market Depth Declines Significantly
Comparatively, Binance.US has been the hardest hit among the three exchanges targeted by the SEC lawsuits. Its market share in the United States has dwindled from 20% in April to a mere 4.8% today.
In contrast, Coinbase’s market share has surged from 46% to 64% during the same period for reasons that remain unclear, as no specific asset witnessed an unusual surge in trading volume.
While Coinbase may face the most significant repercussions from the lawsuits due to its substantial U.S. presence, the explosive allegations against Binance and Binance.US detailed in last week’s Deep Dive have cast a shadow over the exchange’s future.
Amidst the ongoing legal turmoil, other developments have unfolded in the cryptocurrency sphere. TrueUSD (TUSD), a stablecoin, experienced a de-pegging event after one of its partners temporarily halted minting, causing its value to drop against USDT.
Additionally, top altcoins, including SOL, MATIC, and ADA, suffered significant losses following their identification as securities in the SEC lawsuits.
Nevertheless, the lawsuits filed by the SEC against Binance and Coinbase have caused significant disruption in the cryptocurrency market.
The repercussions of these lawsuits and ongoing regulatory scrutiny continue to reverberate throughout the industry, impacting market dynamics and investor sentiment.
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