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Research Suggests Binance’s Zero-Fee Program Removal Caused Market Share Decline More Than CFTC Action

According to recent research by Kaiko, the market share of Binance in spot trading volume has dropped by approximately 16% over the last two weeks. Many attribute the decline to the charges brought against the exchange by the Commodity Futures Trading Commission (CFTC), but Kaiko’s latest report suggests that liquidity left the exchange when it ended its zero-free trading program on March 22.

Interestingly, Binance’s market share had already fallen below 60% before the regulatory action. The recent charges by the CFTC on March 27 only seem to have worsened the situation, bringing its market share down to 54%. Despite this decline, the use of other Binance products such as derivatives and its American trading desk, Binance.US, has remained steady, indicating that traders may not be overly concerned about the regulatory risks at the moment.

Clara Medalie, Director of Research at Kaiko, said,

“I think traders are far more cost-conscious. The CFTC lawsuit barely made a dent in derivatives volume or volumes on Binance.US, which did not have the zero-fee program.”

Kaiko’s report also revealed that Binance’s American subsidiary has tripled its market share in spot trading volumes since the start of 2023. Binance.US has also started eating into the market share of Coinbase, whose dominance in the country fell from 60% to 49% in the first quarter.

In terms of perpetual futures, a popular derivatives product, Binance’s share of trading volumes only dropped by 2% after the CFTC lawsuit, maintaining its significant lead of 63% over the rest of the market.

The findings suggest that traders are more concerned about trading fees than regulatory action by US authorities. Kaiko’s research indicates that the withdrawal of the zero-fee program had a greater impact on Binance’s market share than the CFTC lawsuit. However, the recent charges have added to the decline in market share for the leading cryptocurrency exchange.

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