Binance market share shrinks in 2023

• Binance’s spot trading share fell to 40% up till October 2023, down from 62% a year ago.
• Binance’s derivatives market share hovered around the 50% level for much of 2023. 

Despite growing skepticism, centralized crypto exchanges (CEXes) remain the most preferred medium investors use to buy and sell digital assets.

Owing to their user-friendly interfaces, larger asset pools, and faster transaction times, these regulated platforms hold the lion’s share of the market.

The performance of CEXes has therefore become a barometer to gauge the health of the broader crypto market. Blockchain analytics protocol 0xScope recently published a report analyzing the shifts in market share of CEXes since the beginning of 2023.

Binance’s dominance declines

As always, the focus was on the world’s largest and most popular trading platform, Binance [BNB]. The crypto behemoth accounted for more than 50% of total trading volumes across all platforms.

Source: OxScope

But while still being in the lead, noteworthy declines in dominance were observed. For context, Binance had a market share of 54.6% in October last year, which plunged to 45% after July 2023.

Recall that Binance has been at the receiving end of unrelenting regulatory pressure in the U.S., with cases pertaining to violation of rules by both of its spot and derivatives trading operations. Add to it the market’s overall low volatility phase, which lasted for much of the third quarter.

Although market optimism over spot Bitcoin [BTC] ETF approvals brought traders back to CEXes, there was no denying that Binance had a challenging 2023.

Upbit’s rise in spot trading

The marked weekly drops in spot volumes were a better indication of the slowdown. Binance’s market share plummeted to 40% until October 2023, down from 62% a year ago.

Source: OxScope

On the other hand, Coinbase, the largest exchange in the U.S., remained steady despite a fair share of legal dispute with the regulators.  The platform’s market share moved in the range of 5%-7% throughout the year.

However, the biggest success story was that of the South Korean-based Upbit. The exchange clocked a market share of 10% during September, and rose further to 15% in the latter part of October. The fact that Upbit only had a 5% share a year ago served as testament to its rapid rise.

With this, it outperformed Coinbase to become the second-largest exchange by monthly volumes, a first for any Korean exchange.

OKX becomes stronger in derivatives sector

Binance’s performance in the derivatives sector was comparatively better. The market share hovered around the 50% level for much of 2023, as evident below.

Source: OxScope

OKX [OKB] turned out to be a gainer in this category of market trading. In fact, OKX’s share of derivatives trading rose from 10% last year to 15% until 17 October.

According to CoinGecko, at press time, OKX clocked $12 billion in derivatives trading in the last 24 hours, the second-highest after Binance.

Other second-tier players like Bybit, Bitget maintained a steady share of volumes. The report highlighted that derivatives trading dominated the overall crypto trading landscape.

Binance’s asset value dips

Another popular metric to measure a CEX’s efficiency was the exchange funds value, or asset value. Binance again had the upper hand.  However, its market share gradually shrank over the last year, dropping from 50% to 45%.

Source: OxScope

Binance’s lost market share was possibly scooped up by Coinbase and OKX, explained by the steady increase in their reserves in the same time period.

Moreover, Binance and Coinbase accounted for more than 60% of the deposit addresses in the CEX market. The deposit address count is seen as an indicator of the number of users on the exchange.

However, OxScope added a caveat that the data may not be an accurate representation, considering the difference in deposit and withdrawal rules of different exchanges.

Source: OxScope

But even though one were to take the aforementioned data at face value, new contradictions emerged.

Read Binance Coin’s [BNB] Price Prediction 2023-24

Despite having a large number of deposit addresses, Coinbase’s active address count was disproportionately low. This suggested that old addresses were no longer being used.

To the contrary, the active address count of Binance and OKX matched their deposit addresses levels.