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How Binance edged out rivals to establish dominance in spot trading

2min Read

The crypto market became more centralized in 2023 with dominance of the top exchange jumping to nearly 60% from less than 30% in 2020.

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  • Binance ate into the share of its nearest rivals and consolidated its position in the market.
  • Binance’s market share witnessed a considerable decline in 2023, weighed down by regulatory scrutiny in the U.S.

The buzzword thrown very frequently around in the ever-expanding world of cryptos and blockchains is “decentralization”. The idea is that no single entity gets to wield a disproportionate share in day-t0-day operations, but rather scattered across several players with equal influence.

However, does the crypto market actually function that way?

Crypto market data provider Kaiko highlighted the changing dynamics of the crypto spot trading market over the last three years. As per their analysis, the market became more centralized in 2023 with dominance of the top exchange jumping to nearly 60% from less than 30% in 2020.

Source: Kaiko

A deeper examination of the trends revealed that the market share of the top 4 and top 8 exchanges has largely stayed the same. Furthermore, the combined share of the top two exchanges was roughly around 65% in 2023.

Putting the above two deductions in context, it appeared that the trading platform – in this case Binance, which was already a market leader in 2020, scooped up the majority of business from its nearest rivals and consolidated its position in the market.

The growth trajectory of Binance

Launched in 2017, Binance has led the global crypto trading volume over the years and retained its position as the world’s largest digital asset exchange at press time. The historic bull market of 2020-21 led to a dramatic rise in its fortunes with its global revenue in 2021 shooting up by 263% year-on-year (YoY).

Binance continued to expand its market share even during the bear market of 2022. The shocking collapse of FTX in early November, which was the third-largest exchange at that time, resulted in an increase of seven percentage points to Binance’s spot trading market share, according to an article by Financial Times.

Regulatory scrutiny bringing parity?

U.S. regulatory oversight has increased significantly in 2023 with almost all the bigwigs in the industry, such as Coinbase, Kraken and Binance itself getting targeted.

The result of these actions has had a bearing on Binance’s dominance. After jumping to 64% in the first two months of 2023, Binance’s market share plunged to 50%, according to a recent tweet by Kaiko.

Kaiko added that lesser-known exchanges were gaining ground. However, considering Binance’s established position in the digital assets market, it remains to be seen whether the dominance would fall below 50% in the near term.

According to CoinGecko, trades worth $6.8 billion were executed on the crypto behemoth in the last 24 hours, representing an increase of 27.81%.

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Aniket Verma works as a journalist at AMBCrypto. Contrary to most who are primarily interested in merely tracking price movements of cryptos, his focus is on examining the niche intersection between cryptocurrencies and traditional finance. A so-so Bitcoin maximalist, Aniket has a strong disdain for memecoins and the unfounded frenzy they seem to generate every market season. Coming from a strong engineering background, Aniket previously worked as a Content Manager for TV9 Network. Before his stint over there, he was an Associate Multimedia News Producer at Reuters.
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