It’s fair to state that Binance US, the American arm of the world’s foremost cryptocurrency exchange, has navigated a turbulent period marked by substantial customer withdrawals and a notable decline in trading activity over the past few months.
According to data from market analytics firm Kaiko, weekly trading volumes on the platform have recently plummeted to a mere $40 million, marking a staggering 99% decrease from the nearly $5 billion recorded in March, a time when the cryptocurrency industry was displaying signs of resurgence. In the ensuing discussion, we will explore the factors contributing to this significant downturn.
The lawsuit filed by the SEC.
While the decline in weekly trade volume began in early May, its pace notably accelerated following the filing of a lawsuit by the U.S. Securities and Exchange Commission (SEC) against Binance, its CEO Changpeng Zhao (CZ), and the American subsidiary, Binance US.
The SEC’s allegations encompassed various violations, including self-dealing, market manipulation, and the offering/sale of numerous unregistered securities such as BNB and BUSD.
Furthermore, the SEC initiated a restraining order against Binance US, freezing its assets. In the wake of this legal action, the exchange removed over 100 trading pairs, including BCH/BTC, BCH/USDT, DOT/BTC, XTZ/BTC, AAVE/USDT, COMP/USDT, EOS/USDT, and numerous others.
It’s worth noting that Binance and its U.S. counterpart are not the sole crypto entities engaged in legal battles with the regulatory authority. The SEC has also filed a lawsuit against Coinbase, alleging the provision of trading services involving unregistered securities like ADA, SOL, MATIC, and others.
The market couldn’t sustain its momentum.
Another contributing factor to the lackluster weekly trade volumes on Binance US might be the broader cryptocurrency market, which exhibited strong performance until mid-August but experienced a downturn thereafter.
For instance, Bitcoin was trading at approximately $29,000 on August 16, but its price subsequently dropped below $26,000 in the ensuing days. Altcoins like ETH, XRP, DOGE, SHIB, and numerous others also encountered comparable volatility.
These declines in prices could have dampened investor sentiment, thereby resulting in decreased trading activity on the platform.
The Endless Flow of FUD (Fear, Uncertainty, and Doubt).
Fear, Uncertainty, and Doubt (FUD) could potentially be another reason for driving investors away. Binance and its U.S. branch have faced unsubstantiated reports that have cast doubt on their credibility and standing.
CEO Zhao has been an outspoken critic of these rumors, using his platform on Twitter to encourage his followers to disregard media misinformation and deceptive details. He also believes that FUD and external pressures have actually brought the Binance community closer together: