Binance, the world’s largest centralized cryptocurrency exchange by volume, has experienced a marked reduction in its spot trading dominance, falling to 25% in December 2023. This represents the exchange’s lowest market share in spot trading since January 2021 and illustrates a profound shift in where the global crypto market, valued at approximately $3.2 trillion, is primarily traded.
At its peak in 2023, Binance managed close to 60% of all spot crypto trades, capitalizing on the fallout from the FTX collapse which caused many traders to seek new venues. However, recent data from CoinDesk Data reveals that Binance’s spot market presence has since diminished sharply, decreasing from 28.5% in November to 25% in December.
This decline not only represents a four-year low but also underscores a larger transformation in the market’s structure. The volatility previously seen appears less like a temporary fluctuation and more like evidence of sustained erosion, as industry analyst Jacob Joseph notes. This shifting landscape appears to modify the traditional channels through which cryptocurrency trading volume flows.
Spot trading, which usually accounts for about one quarter of all crypto transactions, is only one facet of crypto markets. The majority of crypto trading volume is concentrated in derivatives, particularly perpetual futures contracts. Binance, which has also been a dominant force in this space, is witnessing a sharp contraction here as well.
Previously, Binance’s dominance in derivatives trading reached nearly 70%, but this has since dropped by half to around 35%. While Binance remains the largest centralized exchange for both spot and derivatives globally, the trend indicates a longer-term decline rather than short-lived market movements.
The volume that Binance is losing is not being absorbed by U.S.-based exchanges, such as Coinbase Global Inc. Instead, offshore entities have expanded their share by attracting market participants. Exchanges like Bybit have gained substantial trading volumes in both spot and derivatives markets, HTX (formerly Huobi) has drawn traders predominantly across the Asia-Pacific region, and Gate.io has managed to increase its share, especially in perpetual futures markets.
U.S. exchanges, despite receiving improved regulatory clarity, particularly under guidelines from the Trump administration, have seen only modest gains. This dynamic is partly due to the nature of U.S. crypto trading, which is more institution-driven and often conducted via over-the-counter (OTC) desks or off-exchange platforms, reducing the impact on publicly reported volumes.
Meanwhile, on-chain derivatives platforms, most notably Hyperliquid, are introducing innovative competition to traditional centralized exchanges by enabling users to trade perpetual futures directly on blockchain networks. These platforms operate without centralized custody, reducing friction by eliminating know-your-customer (KYC) requirements and removing withdrawal caps.
The growth of Hyperliquid suggests that traders native to the crypto ecosystem are increasingly favoring decentralized on-chain options when those platforms can match the user experience of centralized exchanges. Such structural changes pose a challenge to Binance’s prevailing business model, which has relied heavily on capturing high trading volumes through competitively low fees and robust liquidity via centralized order books.
Binance first rose to dominant market positions after offering zero-fees trading starting in July 2022, following the collapse of TerraUSD. This strategy drove significant volume surges, particularly in the aftermath of FTX’s failure in November 2022. By the time Binance concluded its zero-fees promotion in 2023, its share of spot trading volume was nearing 60%.
However, this once-formidable competitive advantage is now waning. Traders are migrating to other platforms that offer superior token listings, increased leverage limits, or the advantages of on-chain trade execution, diluting Binance’s previously strong hold on the market.
In response to evolving market conditions, Binance announced a significant leadership adjustment with the appointment of co-founder Yi He as co-CEO, marking its most notable executive change since CEO Changpeng Zhao stepped down two years prior. Parallel to this, regulatory developments include a pardon for Zhao from Donald Trump in October, which reduces regulatory pressures and could facilitate Binance’s efforts to grow its U.S. operations distinct from its global platform.
Additionally, Binance has secured three licenses from Abu Dhabi’s financial regulator, signaling an expansion into regulated markets. Despite these strategic moves, the ongoing departure of trading volumes suggests that changes in governance and regulation alone may not be sufficient to reverse a shift in user preferences that have already established momentum away from Binance.