Bitcoin (BTC) saw a sudden surge in price to $138,000 on Binance.US during the early hours of June 21. However, the spike was very brief and lasted only seconds before returning to its normal level. The flash-pump was specific to the exchange’s BTC/USDT trading pair, while other assets continued trading at their usual levels.
SEC Lawsuit Affects Market Depth on Binance.US
The US Securities and Exchange Commission filed a lawsuit against Binance.US on June 5, causing concerns about potential asset lock-ups. This led to market makers and traders fleeing the exchange. As a result, blockchain analytical firm Kaiko reported that the exchange’s market depth fell by almost 80% as of June 12. The market depth for 17 tokens also dropped to $7 million from the $34 million recorded on June 4. Kaiko stated that “[Binance US] market makers are nervous and want to avoid volatility-induced losses and the non-negligible possibility that their assets could get stuck on an exchange à la FTX collapse.”
Liquidity Issues and Reputation Damage
Binance.US has also been facing liquidity issues as its banking partners halted their USD payment channels. In May, Bitcoin traded at a discount of nearly 3% on Binance US compared to other rival exchanges. The exchange’s market share in relation to other U.S.-based platforms has dropped to 1%, which is significantly lower than its all-time high of 27% recorded a few months ago. Kaiko stated that “the exchange’s reputation has been severely harmed” by the SEC lawsuit filed against it. Furthermore, the exchange had to lay off about 50 staff members across several departments.
Binance.US to Fight SEC Allegations in Court
Despite the challenges, Binance.US has maintained that it will fight the SEC’s allegations in court. While the court rejected the SEC’s attempt to freeze its assets, the exchange still has to deal with the aftermath of the lawsuit and its impact on its reputation and market share.