Binance bulls face make-or-break test as spot dominance hits 25% low

Binance’s spot share has slid from ~60% to 25% and derivatives from ~70% to ~35% as offshore CEXs and on-chain platforms like Hyperliquid steadily erode its once-dominant position.

Binance, the world’s largest cryptocurrency exchange, has experienced a significant decline in its dominance of the spot cryptocurrency market, according to recent market data.

The exchange’s share of global spot trading volume fell to 25% in December, the lowest level recorded since January 2021, according to data reported by Bitcoin Sistemi. In November, the share stood at 28.5%. At its peak in 2023, Binance handled approximately 60% of global spot transactions.

Binance spot assets drop 25% in December

Spot transactions encompass trades where crypto assets are directly bought and sold and ownership changes hands. In the cryptocurrency market, with a total size of approximately $3.2 trillion, spot transactions generally account for about a quarter of the total volume, with the majority of transactions concentrated in derivative products such as perpetual futures contracts.

The company’s market share has also declined in the derivatives market, its main source of revenue. Binance’s share of the derivatives trading market has fallen from a peak of approximately 70% to around 35%, according to the data. While Binance remains the world’s largest centralized exchange in both spot and derivatives trading, the declines indicate intensifying competition and a long-term structural shift, according to analysts.

Research analyst Jacob Joseph stated that a significant portion of the trading volume shifting away from Binance is moving to offshore exchanges rather than U.S.-based platforms. Exchanges including Bybit, HTX, and Gate are gradually absorbing the shift, while Coinbase has seen relatively limited gains among U.S. platforms, Joseph said.

Binance also faces pressure from next-generation platforms that enable on-chain trading. On-chain trading platforms such as Hyperliquid are shifting the balance in where and how investors trade, particularly by gaining an increasing share in derivatives trading, according to Joseph. The analyst stated this process indicates a more permanent transformation in the market structure rather than a temporary fluctuation.

While the relatively improved regulatory environment for cryptocurrencies in the United States has supported activity in American crypto markets, this has not translated into a net increase in reported trading volumes on centralized exchanges, according to analysts. CoinDesk Data reported that crypto transactions in the U.S. are largely driven by institutional investors, and an increasing portion of transactions are taking place through over-the-counter desks and non-exchange channels.

Binance’s market dominance developed during a turbulent period for the industry. In July 2022, amid market turmoil caused by the collapse of the TerraUSD stablecoin, Binance launched a zero-fee spot trading campaign, rapidly increasing its market share. The dominance was further solidified following the bankruptcy of rival exchange FTX, with the company’s spot market share reaching nearly 60%. Binance ended its zero-fee campaign in 2023.

The company has taken steps in management and strategy to adapt to changing competitive conditions. Recently, co-founder Yi He was appointed co-CEO, marking the biggest management change since Changpeng Zhao stepped down two years ago. Zhao received a pardon from U.S. President Donald Trump in October, easing some regulatory pressure on Binance, a development analysts said could facilitate the company strengthening its operations in the United States. Binance also expanded its regulatory presence in different regions by obtaining three separate licenses from the Abu Dhabi financial regulator.