Bitcoin (BTC) and other digital assets, such as Tether (USDT), are currently being traded at an 8% discount on the Binance.US platform. The reason behind this situation is the liquidity problems that have arisen following a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). This discrepancy can be observed by comparing the trading price of BTC on Binance.US, which is currently at $27,705.59, with its higher price on rival platforms like Coinbase, Kraken, BitStamp, and others. The same discount can also be observed on other digital assets like Ethereum (ETH), USDT, Solana (SOL), and more, according to Coingecko data.
Impact of Lawsuit on Binance.US Market Depth and Reputation
Ever since the SEC filed a lawsuit against Binance.US on June 5, the market depth of the exchange has plummeted by almost 80%. This decline can be attributed to market makers exiting the platform due to the legal troubles faced by the exchange. As a result, Binance.US discontinued U.S. dollar deposits when its banking partners abruptly halted their payment channels. The exchange then made the transition to a crypto-only platform. This sudden change greatly impacted Binance.US’ reputation, causing its market share to plummet to less than 1%.
The volatility of the exchange’s USD pairs has been significant since then, with BTC reaching a peak of $138,000 on June 21. Prior to this, Bitcoin had been trading at a 3% discount in May. However, assets paired with stablecoins like USDT and USDC continue to be traded at regular prices, as indicated by data from Coingecko.
Tether CTO Paolo Ardoino addressed concerns regarding the deviation of USDT from its dollar peg. He emphasized that this deviation is exclusive to Binance.US, where a general -8% spread seems to be affecting all cryptocurrencies on the platform. Ardoino attributed this situation to the legal challenges currently faced by Binance.US. He stated that Binance.US likely has fewer market makers willing to engage in arbitrage at the moment. On Binance.com, USDT is trading 1bps above the dollar, indicating that the issue is specific to Binance.US.
Ardoino further clarified that Tether is responsible for its primary market, which is tether.to. The role of arbitrageurs and market-making professionals is to handle the secondary markets, such as crypto exchanges. In other words, Tether’s responsibility lies in maintaining stability in the primary market, while market makers play a crucial role in ensuring liquidity and balancing prices in the secondary markets.
The liquidity issues on Binance.US resulting from the lawsuit filed by the SEC have led to a significant discount in the trading prices of Bitcoin and other digital assets on the platform. This has affected the market depth of Binance.US and caused a decline in its reputation. While stablecoin-paired assets continue to be traded at regular prices, the deviation from the dollar peg is exclusive to Binance.US. Tether maintains its primary market responsibility, while market makers handle the secondary markets by engaging in arbitrage and market-making activities.
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