Bitcoin price started trading with a price difference of up to $1,000 between different exchanges. Specifically, Binance’s US arm, Binance.US, currently offers higher than usual prices of $500-$1000.
Bitcoin price trades at a premium of $500-$1000 on Binance.US
The price gap between Bitcoin’s major exchanges like Binance and Coinbase and Binance.US has widened sharply this month. Data shows that BTC, which is traded at $ 27,600 in global markets, is traded at a premium of $ 500-1000 on Binance.US. The deepening price gap is raising concerns from regulators that legal action will be taken soon.
According to the data, the BTC/USD pair traded on Binance.US today has reached a gap of $650 compared to its counterpart on Coinbase. The biggest difference before that was just $20 at the end of April.
Why is the price difference widening?
According to Twitter’s @fewseethis, the high price on Binance.US is likely due to market makers leaving the exchange in anticipation of regulatory action. Market makers are institutions tasked with providing liquidity to the order book.
However, the imminent intervention of regulators worries market players. In particular, Binance has been under the lens of US regulators since March.
binance US has been trading at a big premium to the rest of the market skewing funding rates on some other exchanges (particularly bitmex).
market makers left? regulatory action incoming?
— few (@fewseethis) May 8, 2023
In February, Binance.US entered the U.S. Securities and Exchange Commission’s (SEC) radar when it comes to trading affiliates. In March, an official said that Binance.US operates an unregistered securities exchange in the United States.
@fewseethis “If there is some form of government action against Binance.US and the market makers who usually do business there know about it, it is likely that they will leave and there is not enough liquidity and the possibilities for arbitration are reduced,” says @fewseethis. It implies that there is regulatory uncertainty behind the price gap opened between exchanges.
Market makers migrate
As we reported as Kriptokoin.com, Binance suspended Bitcoin withdrawals for a short time yesterday. The traffic caused by the emerging BRC-20 token projects was one of the reasons that forced Binance to make this decision.
According to data from Cryptowatch, Binance.US’s order book was skewed in favor of offers – buy orders – at the time of writing. According to Griffin Ardern of crypto asset management firm Blofin, this was a sign of weak market depth and an exodus of market makers.
The chart shows the market depth of 2.5% on Binance.US, a collection of pending buy and sell orders within 2.5% of the middle price. The middle price is the average of the bid and ask/offer prices. The green line representing the number of pending buy orders is higher than the red line representing sell orders.
Ardern said, “When liquidity is sufficient, the depth of the buy and sell sides often changes constantly. However, a dynamic balance is maintained. On Binance.US, the order book is unstable, with many more buy orders than sell orders. Such a depth chart is undoubtedly abnormal for a giant stock market. “Major market makers are leaving Binance.US, likely due to regulatory pressure and renewed compliance requirements.”
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