Cryptocurrency exchange Binance is stepping up its efforts to capture market share by expanding its free trading to include the popular ether token, ahead of one of the most anticipated events in the short history of the cryptocurrency market.
Binance, already the largest digital asset trading venue in the world by volume, waives commissions for one month for clients trading ether, the second largest digital token, using Binance’s internal currency known as BUSD.
The initiative precedes a widely anticipated update to the ethereum blockchain, in which ether transactions are recorded. Known in the industry as Merge, it promises to move from a legacy, energy-intensive digital accounting system described as “proof of work” to a “proof of participation” model that will significantly reduce its carbon footprint.
The move to offer free trading of ether ahead of the big event underscores how Binance is leveraging the fallout from this year’s cryptocurrency crash to make a new attempt to attract 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 CEO Changpeng Zhao said earlier this year.
Over the summer, Binance began offering commission-free cash trading in several bitcoin pairs, including euros and pounds. Over the next eight weeks, BUSD’s market cap grew 8%, to $ 19 billion, according to data collected by CryptoCompare.
So-called stablecoins such as BUSD are often used as a store of value among digital coin bets because 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 Circle’s tether and USDC.
Sipho Arntzen, a next-generation research analyst at Julius Baer, said Binance’s move “could really represent some sort of ‘market-taking’ strategy.”
Binance’s latest initiative will run until September 26th. He described the merger as “an important milestone for the ethereum and the great Web3 ecosystem that all users should have the opportunity to be a part of.” Ethereum is widely used by cryptocurrency developers as it aims to make blockchains more useful than a simple transaction database.
Binance’s commission-free trading comes after bitcoin, the industry’s flagship cryptocurrency, plummeted from a price of nearly $ 70,000 to lows below $ 20,000, while the bankruptcy of the TerraUSD stablecoin triggered sales that overwhelmed many big names in the industry. sector, including Celsius and BlockFi lenders and hedge funds Three arrows capital.
“This approach [to free trading] it has also been seen in traditional finance in the past, where a well-capitalized newcomer seeks dominance with the appeal of commission-free trading for a limited time, ”said Rufus Round, chief executive officer of GlobalBlock Digital Asset Trading, a broker.
Binance said it “would lose some fees”, but the company “continues to have strong reserves”.
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Binance has already increased its role as a leader in the cryptocurrency market this year. The exchange has a 55% market share in cash trading, according to CryptoCompare, with an increase of nearly 10 percentage points since January. Its closest rivals, Coinbase and FTX, have stakes of less than 10%.
In response to the collapse in digital asset prices, rival cryptocurrency exchanges have embarked on reshaping their long-term trading strategies. Coinbase said nearly a fifth of its second-quarter revenue came from services and subscriptions, even though it accumulated a net loss of $ 1.1 billion.
“Temporarily waiving commissions on their major trading pairs can be seen as a concession to attract more flow in the current low volume trading environment, which [Binance] they will indirectly benefit from increased traffic in other trading pairs and other product lines and offerings, ”said Peter Habermacher, chief executive officer and co-founder of cryptocurrency-focused investment firm Aaro Capital.
However, FTX has warned the rest of the cryptocurrency industry that it is looking to attract customers, with a series of high-profile sports sponsorships and securing an option to buy struggling BlockFi.
“I imagine [Binance] is watching FTX expand into all kinds of areas and thinking it needs to step up its game, ”said Ilan Solot, partner at venture capital firm Tagus Capital.
Even so, Julius Baer’s Arntzen said free trade potentially indicated that Binance expected the size of the market to remain small in the short term.
“This ranking break by Binance could be the start of a commission-free trading trend among large centralized exchanges,” he said. “We may have a situation in the future where commission-free trading is the norm rather than the exception, similar to what we have seen in the world of traditional finance.”
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