SEC Lawsuit Impact: Binance.US Witnesses 76% Decline in Market Depth

Binance.US, the U.S. arm of cryptocurrency exchange Binance, is experiencing a significant decline in market depth as market makers and traders withdraw from the platform in response to the recent lawsuit filed by the U.S. Securities and Exchange Commission (SEC).

The lawsuit, alleging securities violations, has had a profound impact on liquidity, with market depth for 17 tokens on Binance.US dropping by 76% within just one week.

Following the SEC’s lawsuit against Binance.US, market depth on the exchange plummeted by 76%, according to a report by Kaiko.

The aggregated market depth for 17 tokens significantly decreased, reflecting a mass exodus of market makers and traders from the platform.

Binance.US experienced a sharp decline in its U.S. market share, dropping from 20% in April to 4.8% in June. This erosion of market share highlights the impact of the SEC lawsuit on investor confidence and participation in Binance.US.

The report by Kaiko revealed that the market depth on Binance.US declined from $34 million on June 4 to $7 million on Monday, indicating a substantial reduction in liquidity within a short timeframe. The altcoin markets’ sell-off contributed to this decline in market depth over the weekend.

Binance’s global platform also witnessed a decrease in market depth, dropping 7% since the beginning of June. The SEC lawsuit against Binance appears to have sparked concerns among market participants, leading to an industry-wide decrease in liquidity.

Coinbase, another U.S.-based exchange that was sued by the SEC, experienced a 16% drop in liquidity during the same period.

This decline suggests that market makers are becoming cautious to avoid losses caused by market volatility and the potential risk of funds becoming trapped, as seen with the recent FTX collapse.

Interestingly, while Binance.US’s market share dwindled to 4.8%, Coinbase’s market share increased from 46% to 64% over the past week. The reasons behind this shift in market share remain unclear and warrant further analysis.