Bitcoin premium on Binance.US is a symptom of an illiquid market: Kaiko
Bitcoin (BTC) premium trading on Binance.US is a symptom of an illiquid market and not evidence of market makers abandoning the platform, according to blockchain analytics firm Kaiko.
In its May 9 report, the data aggregator explained why the flagship digital asset was trading at a 2.5% premium on Binance.US compared to other US-based exchanges.
According to the firm, speculations that market makers might leave the platform were just rumors as there are no changes in market depth.
Since April, several members of the crypto community have highlighted the increasing premium BTC trading on the platform – with many speculating that market makers and insiders may leave due to possible legal action.
However, Kaiko rejected such claims, noting that the exchange’s battle for a banking partner could play a role in the trade.
Kaiko said:
“The premium on Binance.US is more likely related to the exchange’s struggle to find a banking partner since the closure of Signature and Silvergate. With an increasing demand for BTC in general, investors on Binance.US are likely seeing faster withdrawal times for BTC compared to USD, and are rushing to trade into BTC at the same time, resulting in a premium on the exchange.”
Compared to the global Binance exchange, if BTC’s 1% market depth has alternated between several highs and lows, Binance.US’s depth has remained stable. Kaiko data noted that this would not have been the case if a major market player had left the platform.
Following the US banking crisis that claimed three major crypto-friendly banks in March, the crypto industry has been exposed to low liquidity risk. At the time, CryptoSlate Insight reported that BTC’s order book hit a 10-month low.
Another report noted that US-based exchanges and market makers became less liquid as they appear to be most affected by Silvergate’s implosion.
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