Binance Curb on Zero-Fee Trading May Cost Market Share, Boost TrueUSD Stablecoin: Kaiko Research Head
After nine months, Binance removed practically all zero-fee trading pairs from its platform, keeping the promotion solely for the TUSD-bitcoin pair.
According to Kaiko’s head of research, Binance’s market share may decrease after the world’s largest cryptocurrency exchange by trading volume eliminated the majority of zero-fee trading after only nine months.
On Wednesday, Binance gradually stopped offering $0 fees for buying and selling bitcoin (BTC) with a number of asset pairs, retaining the promotion exclusively for the stablecoin TrueUSD (TUSD). The decision made by Binance could signal a significant change for centralised crypto exchanges, ending Binance’s hegemony. According to Kaiko data, zero-fee trading pairings have made up almost 60% of total trading volume on the platform. It might also highlight TUSD’s position as Binance’s preferred stablecoin.
In a market crash last summer when exchanges were struggling with low trading volumes and declining earnings, Binance stole considerable market share from competitors by launching zero charge trading for some BTC pairings globally. Clara Medalie, research director at cryptocurrency market data company Kaiko, emphasised how the measure helped Binance increase its market share from 50% last July to 72% when compared to the most liquid exchanges.
Zero-fee trading is unsustainable in the long run, but it allowed Binance to quickly obtain a significant amount of market share, Medalie wrote in an email to Coindesk. “We could anticipate a short-term decline in market share without zero costs for the majority of BTC pairs.”
Emergence of TrueUSD
Once authorities took action against Binance USD, TrueUSD gained prominence (BUSD). The New York Department of Financial Services (NYDFS) ordered Paxos, the company that produces BUSD under the name of the exchange, to discontinue the stablecoin last month. The supply of BUSD then dropped sharply from $16 billion to $8 billion.
“The exchange looks to have crowned a likely successor in TUSD,” Medalie remarked.
TUSD more than doubled in market capitalization after the announcement of BUSD’s phaseout, reaching $2 billion, CoinGecko data showed. The stablecoin is administered by Archblock, formerly known as TrustToken, and its intellectual property was acquired by a little-known Asian financial firm Techteryx. TUSD was reportedly created by Justin Sun, the founder of Tron and a crypto billionaire, however the company has previously rejected these claims.
The BTC-TUSD trade volume had lately surged tenfold compared to Tuesday, Dustin Teander, an analyst at crypto research firm Messari, stated in an email. But, the dominating stablecoin USDT’s $6 billion and BUSD’s $1 billion volume are dwarfed by the asset pair’s $50 million spot trading volume over the previous 24 hours, he continued.
It’s still too early to say how much Binance wants to promote TUSD as the “de facto standard” on its platform, according to Mike van Rossum, founder of the cryptocurrency trading service Folkvang. He also noted that making trading free is a potent tactic.
“This zero fee offer can quickly grow into the biggest market by volume if consumers end up trusting TUSD – which is highly dubious right now,” he said.
In an email, a representative for Binance stated that the exchange’s objective at the moment is to find a variety of stablecoin products to offer consumers, with a focus on those that are open, regulated, and have solid connections to banking institutions in markets that foster innovation.
The representative continued, “TUSD is the first of many new stablecoin products that will hopefully be made available to users.”
Earlier this month, when many U.S. banks with connections to cryptocurrency companies were forced to shutter due to a run on deposits, the stablecoin market saw volatility.