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Binance Efforts to Increase Liquidity in Crypto Market Amid Declining Market Shares

In this post:

  • Binance is launching additional BTCUSDT and ETHUSDT daily options to increase liquidity in the crypto market.
  • The platform is also updating tick size and offering rewards for adding liquidity to specific pools, but regulatory pressure and market maker exits may still impact its market share.

Binance, one of the world’s largest cryptocurrency exchanges, has recently been making several efforts to increase liquidity in the crypto market. The low liquidity levels have been having a negative impact on Bitcoin and Ethereum prices, with BTC prices briefly falling to the key 200-week moving average (200-WMA). As a result, Binance has announced the launch of additional BTCUSDT and ETHUSDT daily options from May 15, which will help bring some liquidity by increasing Bitcoin and Ethereum trading, especially against USDT pairs.

European-Style Options Contracts

According to an official announcement on May 12, Binance revealed that it plans to launch additional BTCUSDT and ETHUSDT daily options in the Binance Option product. Users will be able to trade options daily on the exchange from May 15 08:00 UTC onwards. These daily options will be European-style options contracts. It will be T+3 BTCUSDT and ETHUSDT daily options, which will be listed every day. 

However, Binance will not list T+3 BTCUSDT and ETHUSDT daily options if it coincides with BTCUSDT and ETHUSDT weekly, monthly, or quarterly options contract expiry day. BTCUSDT and ETHUSDT daily options will have a trading duration of three days and expire at 08:00 UTC. This effort will increase liquidity in the market due to a rise in trading.

Additional Rewards for Liquidity Pools

On Thursday, Binance announced two other efforts to increase liquidity. Users who add liquidity to the WBTC/BTC and WBTC/ETH liquidity pools will receive WBTC Combo Rewards in addition to BNB Rewards and Pool Rewards. The activity is only available from May 11 to June 10. This initiative is expected to increase the number of users adding liquidity to these pools, which will subsequently increase the market’s overall liquidity levels.

Furthermore, Binance will update the tick size (the minimum change in the unit price) for some spot trading pairs from May 18. This will further increase market liquidity and improve the trading experience. By reducing the tick size, traders will be able to execute trades with greater precision, which will incentivize them to trade more frequently. This, in turn, will help to increase liquidity levels and improve overall market conditions.

Market Shares of Binance and Coinbase

Despite Binance’s efforts to increase liquidity, it has been experiencing declining market shares in recent months. Leading market makers, including Jump Crypto and Jane Street, have been exiting the US, and regulatory crackdowns in the US have caused liquidity issues for exchanges such as Binance and Coinbase. In fact, Bloomberg reported that Binance’s spot-trading volume share fell to 51% in May from 73% in March. While the market shares of Huobi, OKX, and South Korean exchanges have increased. US regulatory crackdowns have led to users worrying about the safety of their funds, causing them to diversify into other centralized exchanges.

One of the main factors contributing to the declining market shares of Binance and Coinbase is regulatory crackdowns. In recent months, regulators in several countries, including the US, have been tightening their grip on cryptocurrency exchanges. This has led to increased scrutiny of these exchanges’ operations and increased regulatory costs. As a result, exchanges like Binance and Coinbase have had to comply with stricter regulations, which has caused them to lose market share to other exchanges that operate in more favorable regulatory environments.

Conclusion

The recent efforts made by Binance to increase liquidity in the cryptocurrency market, such as the launch of additional BTCUSDT and ETHUSDT daily options, updating tick size, and offering rewards for adding liquidity to specific pools, are expected to bring some positive impact on the liquidity of Bitcoin and Ethereum. However, with increasing regulatory pressure and market makers exiting the US, Binance is facing challenges in maintaining its market share, and it remains to be seen how successful these efforts will be in the long term.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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