A Volume-Boosting Tactic? Binance Contacts Lesser-Known Crypto Projects

Binance, the largest cryptocurrency exchange in the world by trading volume, in the past week has been reaching out to digital asset projects on its platform with smaller market capitalization and low-liquidity tokens.

According to The Block, which first reported the news, the exchange has been asking about the market makers associated with these projects. Binance is also asking if the projects would be open to allocating up to 5% of their circulating tokens into its savings pools in exchange for interest earnings.

A Race for More Volume?

While the move appears to be targeted at boosting trading volumes on Binance, a spokesperson from the exchange told CoinDesk the move is part of the exchange’s “ongoing risk management initiative.”

“These projects have relatively lower market liquidity trading pairs and/or a smaller market capitalization, which potentially exposes users to risk, including potential market manipulation,” the spokesperson said.

In other words, Binance sees the move as a way for the crypto projects “to enhance their liquidity protection.” Furthermore, the spokesperson emphasized that the call for participation in its saving pool is optional, The Block reported.

Unverified screenshots of what appears to be the line of communication between Binance’s agents and the smaller crypto projects have also emerged on social media.

Lower Volatility Hits Crypto

Binance’s recent efforts come to light as the crypto spot and derivatives market share of the exchange fell for the fifth consecutive month in July to 40.4%, according to data from CCData, a digital assets data provider. On the contrary, exchanges such as Huobi, DigiFinex and KuCoin, have seen their market share grow 6%, 3.5% and 1.3%, respectively, since January 2023.

In July, the crypto industry continued to suffer a lack of volatility, with spot and derivatives trading volumes decreasing 10.5% and 12.7% to $515 billion and $1.85 trillion, respectively. In addition, the total volumes of crypto spot and derivatives traded on centralized exchanges such as Binance and Coinbase declined 12% in July, hitting $2.36 trillion. This marked the lowest monthly trading activity, year to date.

With $208 billion in total spot trading volume, Binance remains the biggest crypto exchange in the world. However, Upbit, a South Korea-based crypto, last month beat top exchanges such as OKX and Coinbase to emerge as the second-largest exchange by trading volume after Binance.

Specifically, Upbit’s spot trading volume in July jumped 42.3% to $29.8 billion. On the contrary, OKX and Coinbase saw their volumes descend to $28.6 billion and $29 billion, respectively, Finance Magnates reported.

The fall in Binance’s market share has persisted in recent months as the cryptocurrency exchange faces ongoing regulatory challenges in multiple regions, notably in the United States where federal authorities are considering filing criminal charges against the platform. Already, Binance is contending with civil lawsuits initiated by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).