Can FTX threaten Binance’s dominance?

As cryptocurrencies FTX have slowly established themselves as an important asset class for investors in recent years, a number of exchanges have become increasingly important. However, Bitmex was once the king of derivatives, but now has a lower Open Interest (OI) than both Phemax and BTSE. Binance is one of those players who has been around for a long time but only recently emerged.

One argument that could be made for such a phenomenon is that Coinbase, which is no bigger but also dominant in space, has yet to include derivatives trading.

Hence, in this article, we’re going to be comparing an emerging exchange, FTX, and assessing whether Binance’s ability to follow the industry could be jeopardized by this relatively new venture.

Leading with Binance, FTX shows strength

Source: Skew

In terms of market liquidity, Binance remains highly efficient. Data from Skew suggests it has better bid-ask spreads than FTX, at $ 1 million, $ 5 million and $ 10 million at press time.

However, this difference is constantly changing. Binance has commendable liquidity, but FTX is no less. The real difference, however, is in another aspect.

Binance is king in terms of trading volume on the spot market, with over $ 22 billion in the past 24 hours. Meanwhile, FTX reached $ 2.8 billion and Coinbase reached $ 4.14 billion. In terms of trading volume in the derivatives market, Binance recorded over $ 64 billion, nearly 9 times the FTX trading volume of $ 9.5 billion. It’s clear that Binance has the upper hand over FTX in terms of performance.

There is always the word “but”

Though Binance has the upper hand in the stats, FTX has had support from some of the world’s leading venture capitalists such as Sequoia Capital and the hedge fund Third Point. On the other hand, Binance is constantly faced with a number of inquiries, complaints, and legal action against them.

2021 is a difficult time for Changpeng Zhao and his company. China, Japan, Italy, Malaysia, Thailand and the Cayman Islands have banned Binance or taken legal action against Binance.

While FTX has some shareholders outside of the industry, it is subject to a number of laws and regulations. However, this is not the endpoint as Binance can finally find common ground with regulators. Currently, Binance is still leading every exchange, controversial or not.

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