Lawsuits filed by the United States Securities and Exchange Commission (SEC) have had a significant impact on two of the major cryptocurrency exchanges in the United States. Both Binance US and Coinbase are experiencing a decline in their liquidity, causing concern in the market.
According to a study Conducted by market analysis firms Kaiko and Asset Metric, Binance US has seen market makers and traders abandon the exchange en masse. This, after a week of the SEC’s lawsuit, a fact reported by CriptoNoticias.
Liquidity, as measured by the depth of market for 17 tokens on the exchange, has fallen by roughly 80% over the past period. On June 4, just before the lawsuit, the depth of the market was $34 million. Today, it’s down to just $7 million..
Coinbase has also experienced a decline in market depth since the start of the lawsuits. The liquidity of Coinbase has decreased by about 16% compared to the beginning of June, after the demand filed last June 6. Although to a lesser extent than Binance US, according to Kaikothe loss of liquidity is an indication of the restlessness that has generated the current regulatory scenario.
Kaiko mentions that the drop in liquidity suggests that market makers are nervous and looking to avoid potential losses caused by volatility and the risk of your assets being trapped in a situation similar to that of the FTX collapse.
Binance US has been the hardest hit of the two exchanges in terms of declining market share. Being the holder of 20% of the market in April, its participation currently stands at only 4.8%. On the other hand, Coinbase could have more at stake, as 80% of its business is in the United States.
This drop in liquidity has had direct repercussions on the price of bitcoin (BTC) and cryptocurrencies. With the lawsuit against Binance, bitcoin and BNB (currency created by Binance) plummeted, according to CriptoNoticias reports. Of the 12 cryptocurrencies named in the SEC’s complaint, all but the stablecoin Binance USD (BUSD) posted losses last week.
