Binance‘s market share could take a hit following its recent decision to phase out zero-fee trading for most asset pairs, except for TrueUSD (TUSD). This move comes just nine months after the world’s largest crypto exchange by trading volume launched its zero-fee promotion. Kaiko’s head of research claims that this change may signal a larger shift in the landscape of centralized crypto exchanges, impacting Binance’s dominance. In addition, data from Kaiko shows that zero-fee trading pairs account for around 60% of the platform’s total trading volume, further emphasizing TUSD’s favored status on the exchange.
Last summer, when the crypto market was experiencing a downturn with low trading volumes and diminishing revenues among exchanges, Binance implemented zero-fee trading for certain BTC pairs globally. This proved successful as their market share rose from 50% to 72% relative to other highly liquid exchanges, according to Kaiko’s Research Director Clara Medalie.
Medalie noted that while zero-fee trading is not sustainable in the long run, it has been a critical factor in Binance’s success, allowing them to gain massive market share. Without these fee-free BTC pairs, there could be a noticeable decline in their market share for the foreseeable future.
Rise of TrueUSD
TrueUSD’s stature has increased since regulators cracked down on Binance USD (BUSD). Following an order from the New York Department of Financial Services (NYDFS) to wind down the stablecoin, its supply plummeted rapidly from $16 billion to $8 billion. With this shift, “the exchange seems to have crowned a possible successor in TUSD,” according to Medalie.
CoinGecko data shows that TUSD’s market capitalization has more than doubled since the announcement of BUSD’s phaseout, surpassing $2 billion. The stablecoin is managed by Archblock (formerly TrustToken) and was recently acquired by the Asian investment conglomerate Techteryx. Although reports suggested that crypto billionaire and Tron founder Justin Sun might be behind TUSD, the firm has since denied these allegations.
Dustin Teander, an analyst at crypto research firm Messari, recently noted a tenfold surge in the BTC-TUSD trading volume compared to Tuesday. Despite this impressive increase, the asset pair’s 24-hour spot trading volume of $50 million is still dwarfed by USDT and BUSD’s considerably higher volumes of $6 billion and $1 billion, respectively.
Mike van Rossum, the founder of crypto trading firm Folkvang, believes that it is still too soon to assess how much Binance wishes to prioritize TUSD as its main platform currency. However, he commented that introducing free trading could significantly grow the pair’s market share if users trust the asset. “If people end up trusting TUSD – which is uncertain at this stage – the zero fee promotion could easily become the largest market by volume,” he concluded.
A Binance spokesperson stated in an email that the company is prioritizing identifying multiple stablecoin products that their users can access, such as those that are transparent, regulated, and connected to reliable banking institutions. They hope that TUSD will be one of many stablecoins they offer in the future. The introduction of TUSD comes after some disruption within the sector this month. Several U.S. banks with strong ties to crypto firms were closed by regulators after experiencing a massive withdrawal of deposits.
Last week, Binance re-introduced USDC, USDP, and TUSD stablecoins to its platform after controversially removing them in September 2020 and automatically converting deposits to BUSD.