Crypto exchange Binance is stepping up its efforts to capture market share by expanding its free trade to include the popular token Ether, ahead of one of the most anticipated events in the crypto market’s short history.
Binance, already the world’s largest digital asset trading venue by volume, is waiving fees for a month for customers who trade ether – the second-largest digital token – using Binance’s house currency known as Binance. the name of BUSD.
The initiative comes ahead of a widely anticipated upgrade to the Ethereum blockchain, where Ethereum transactions are recorded. Known in the industry as Fusion, it promises to move from a legacy, power-hungry digital ledger system described as “proof of work” to a “proof of stake” model that will significantly reduce its carbon footprint. .
The decision to offer a free ether exchange ahead of the big event underscores how Binance is using the fallout from this year’s crypto crash to once again try to lure customers to its platform. About 90% of Binance’s overall revenue comes from trading fees, which fluctuate with the price of bitcoin and other cryptocurrencies, private group chief executive Changpeng Zhao said earlier this year.
Over the summer, Binance began offering fee-free cash trading on several bitcoin pairs, including the euro and the pound. Over the next eight weeks, the market capitalization of BUSD increased by 8%, to $19 billion, according to data compiled by CryptoCompare.
So-called stablecoins such as BUSD are often used as a store of value between bets on digital coins, as they are designed to track the price of the dollar and other traditional currencies. BUSD is one of the largest stablecoins in the world and competes with tether and Circle’s USDC.
Sipho Arntzen, Next-Gen Research Analyst at Julius Baer, said Binance’s move “could indeed represent a sort of ‘market-taking’ strategy.”
Binance’s latest initiative will last until September 26. She described the merger as “an important step for Ethereum and the greater Web3 ecosystem that all users should have the opportunity to be a part of.” Ethereum is widely used by crypto developers because it aims to make blockchains more useful than just a database of transactions.
Binance’s fee-free trading comes after bitcoin, the industry’s flagship cryptocurrency, fell from a price near $70,000 to a low below $20,000, while the stablecoin failed TerraUSD sparked selloffs that engulfed many big names in the industry, including lenders Celsius and BlockFi and hedge fund Three Arrows Capital.
“This approach [to free trading] has also been seen in traditional finance in the past, where a well-capitalized newcomer seeks to dominate with the lure of commission-free trading for a limited period,” said Rufus Round, Managing Director of GlobalBlock Digital Asset Trading, a broker .
Binance said it would “miss some fees,” but the company “continues to have strong reserves.”
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Binance has already increased its leadership role in the crypto market this year. The exchange has a 55% market share in spot trading, according to CryptoCompare, an increase of nearly 10 percentage points since January. Its closest rivals, Coinbase and FTX, have shares of less than 10%.
In response to the crash in digital asset prices, rival crypto exchanges have embarked on reconfiguring their long-term trading strategies. Coinbase said almost a fifth of its second-quarter revenue came from services and subscriptions, even though it posted a net loss of $1.1 billion.
“The temporary waiving of fees on their major trading pairs can be seen as a concession to attract more flow in the current low trading volume environment, which [Binance] will indirectly benefit through increased traffic in other trading pairs and other product lines and offerings,” said Peter Habermacher, managing director and co-founder of crypto-focused investment firm Aaro Capital.
However, FTX has warned the rest of the crypto industry that it is trying to lure in customers, with a series of high-profile sports sponsorships and securing an option to buy the struggling BlockFi.
“I would imagine [Binance] is watching FTX expand into all sorts of areas and think they need to step up their game,” said Ilan Solot, Partner at venture capital firm Tagus Capital.
Even so, Julius Baer’s Arntzen said the free trade potentially indicates that Binance expects the market size to remain small in the near term.
“This break in rank by Binance may represent the start of a trend towards zero-fee trading among large centralized exchanges,” he said. “We may have a situation in the future where fee-free trading is the norm rather than the exception, similar to what we’ve seen in the world of traditional finance.”