Bitcoin Liquidity Worsens on Crypto Exchange Binance.US After SEC Suit

(Bloomberg) — Liquidity on one of the most prominent crypto exchanges has worsened in the wake of head-turning regulatory actions by US officials.

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Bitcoin bid-and-ask depth on Binance.US — the exchange owned by Binance Holding Ltd.’s Changpeng Zhao to serve US clients — has fallen off dramatically, according to researcher Kaiko. That happened after the US Securities and Exchange Commission accused Binance and its chief executive of mishandling customer funds, misleading investors and regulators, and breaking securities rules. Binance has disputed the allegations.

“Market-makers are obviously pulling liquidity from the exchange,” said Conor Ryder, research analyst at Kaiko. “Worsening US liquidity is something that has been playing out over the course of a few months, but this seems to be the straw that broke the camel’s back for liquidity on Binance.US.”

The bid–ask spread is the difference between the prices quoted for an immediate sale and an immediate purchase of an asset, futures contract or currency, including digital ones.

The SEC on Monday laid out a slew of alleged violations against the world’s biggest crypto exchange, Binance, and its leader. Binance called the allegations “disappointing,” saying it had engaged with the regulator in good-faith negotiations to settle the matter. It also said that the SEC was misguided in not providing clarity over rules for digital assets.

A Binance representative didn’t immediately respond with a request for comment.

Binance has seen net outflows following the news from the SEC. It clocked the eighth-largest net outflow on record — of around 14,000 Bitcoin — according to Glassnode. Still, the researcher added that when assessing this trend in relation to the balance held on Binance exchange addresses, the impact can be seen as being minimal.

US regulators have been cracking down on entities in the crypto space following last year’s collapse of a number of previously major participants, including the FTX exchange. The SEC also accused Coinbase Global Inc. of running an illegal exchange. “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance,” Coinbase’s top lawyer said.

Read more: SEC’s Coinbase Lawsuit Heralds Deepening US Crypto Crackdown

Bitcoin accounts for almost half of the $1.1 trillion crypto market’s value. Ether is the second-largest digital asset, with about a 20% overall market share.

Crypto prices declined after the news broke. Bitcoin is down roughly 2.6% since Sunday, to hover around $26,500 on Thursday in New York, Bloomberg data show. Ether has also dropped, falling 3% during that stretch. It was meandering around $1,850 in afternoon trading.

–With assistance from Muyao Shen.