Small Dogs in Crypto
Smaller cryptocurrency exchanges with perceived higher levels of risk have emerged as unexpected beneficiaries in the wake of Binance’s significant decline in market share. This shift follows the US regulators’ charges against Binance for violating federal laws. Notably, companies like Huobi Global and KuCoin, headquartered in the Seychelles, have managed to expand their share of crypto token trading, including bitcoin and ether, since the beginning of the year, according to data from industry research provider CCData. In contrast, exchanges rated as “top tier” by CCData, meeting a “minimum threshold for acceptable risk” for customers, have experienced a drop in their combined market share from 80% to approximately 68% since the year’s outset. During the same period, industry leader Binance has seen its market share decrease from 56% to just above 40%.
This evolving landscape highlights traders’ sensitivity to the legal challenges Binance is facing from US regulatory agencies. In March, the Commodity Futures Trading Commission accused Binance of illegally accessing US customers, followed by the Securities and Exchange Commission in June, which alleged violations involving the commingling of billions of dollars of customer funds across 13 Binance-related entities. Tom Robinson, Chief Scientist and Co-founder of blockchain tracing firm Elliptic, emphasised that, for a significant portion of crypto traders, the ability to exchange funds from potentially high-risk sources anonymously takes precedence over trading on an exchange with a reputation for regulatory compliance. CCData’s definition of “top tier” exchanges revolves around their robust measures to safeguard customer funds, maintain security, and adhere to anti-money laundering standards. Notably, Huobi has exhibited a near 6% market share increase since January, leading the charge in 2023 for non-top-tier exchanges expanding their market presence. What do you think about the situation with smaller firms? And will this trend continue?
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.