Major cryptocurrencies such as bitcoin (BTC), ether (ETH) and Tether’s USDT stablecoin have been trading at large premiums on Binance.US, a sign that investors are exiting the platform in light of the U.S. Securities and Exchange Commission’s (SEC) actions against the company.
The BTC-U.S. dollar trading pair on Binance.US jumped as high as $28,800 earlier on Wednesday morning, some $1,700 higher than the average price across other exchanges at that time, data shows. Recently, the BTC-USD pair was changing hands at $27,900, while the CoinDesk Bitcoin Price Index (XBX), which feeds from prices on multiple exchanges, stood at around $26,400. The difference represents an almost 6% price premium on Binance.US.
The price anomaly developed as the SEC was seeking to freeze assets on the exchange, according to a court document filed on Tuesday. This followed the agency’s Monday lawsuit against Binance, CEO Changpeng “CZ” Zhao and Binance.US, alleging multiple federal securities law violations.
The unusually high price premium is a sign of deteriorating liquidity on the platform as traders are retreating in anticipation of a potential asset freeze, according to Clara Medalie, research director of digital asset data firm Kaiko.
“Market makers are wary ahead of this double blow to Binance's U.S. entity, and are removing liquidity from the exchange's order books in anticipation of a possible freeze,” Medalie said in a note. “No trader wants to get caught with their assets stuck on an exchange.”
BTC and ETH market depth – the ability to absorb large sell and buy orders without moving the price significantly – on Binance.US has dropped significantly since Monday’s lawsuit, Kaiko data shows.
Binance.US announced Wednesday that it will remove a plethora of USDT, BTC and BUSD trading pairs from its Advanced Trading platform and will pause its over-the-counter (OTC) trading service. The move will allow the exchange to concentrate liquidity to the remaining asset pairs and services.
It is not the first time that Binance.US users experienced price discrepancies. In May, the BTC-USD pair traded $650 higher on that exchange than on Coinbase, as crypto market watchers contemplated a possible SEC crackdown and U.S.-based market makers began scaling down operations there.
Edited by Stephen Alpher.
