Binance.US Launching Next Week but Will Only Have Six Cryptocurrencies Available, How Will This Change the Crypto Market?

September 12, 2019 / by Zachary Mashiach

Binance was perhaps the most popular cryptocurrency exchange in the United States since it required zero identification information to sign up and offered access to 565 trading pairs. Also, Binance has volume of around $1 billion every day and high liquidity, leading to optimal cryptocurrency prices and an environment conducive for rapid trading. 

Binance starkly contrasted from most other cryptocurrency exchanges in the United States, where typically full identification information is required to begin trading, and far fewer cryptocurrency pairs are available due to securities regulations. For example, Coinbase Pro only has 51 trading pairs

Unfortunately, due to regulatory uncertainty, Binance changed its terms and conditions in mid-June to prohibit United States residents. This becomes effective on Sept. 12, at which point United States residents will no longer be able to trade on Binance. 

Simultaneous with the ban of United States residents, Binance announced that it would be launching Binance.US, an exchange dedicated to United States users. Binance.US will be opening for registration and deposits on September 18, less than a week after the ban became effective.

Binance.US will only be offering six cryptocurrencies at first, however, including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Bitcoin Cash (BCH), Litecoin (LTC), and Tether (USDT). It is probable that more cryptocurrencies will be added, but it is unlikely that the number of cryptocurrencies available on Binance.US will ever approach the amount available on regular Binance due to securities regulations. Basically, any cryptocurrency that can be considered a security is typically not available on compliant exchanges in the United States. 

Also, Binance.US will require full identification information, making it similar to Coinbase, and not that attractive for United States cryptocurrency traders. 

The loss of regular Binance in the United States may have a profound influence on the crypto market since it will be difficult to find a venue to trade the cryptocurrencies that were available on regular Binance but not available on Coinbase. 

Theoretically, this may cause significant losses in price for numerous alternative cryptocurrencies as United States residents sell of their altcoins on Binance and consolidate into Bitcoin (BTC), and perhaps other major cryptocurrencies like Ethereum (ETH), Monero (XMR), and Litecoin (LTC) which are easily tradeable at cryptocurrency ATMs. 

This effect may have already begun. When the original notice went out in mid-June it is possible that a significant fraction of United States traders stopped using Binance and consolidated into Bitcoin (BTC). Indeed, the Bitcoin (BTC) dominance percentage, which is the Bitcoin (BTC) market cap divided by the total crypto market cap, has risen from 40% — when Binance first announced United States users will soon be banned — to 70% currently

It will be interesting to watch if the Bitcoin (BTC) dominance percentage jumps again in the coming days, although it is likely that the large majority of United States traders have already consolidated their funds into Bitcoin (BTC) and have taken their funds off of Binance at this point. 

In other words, the loss of regular Binance in the United States has the potential to significantly hinder the altcoin market, while making Bitcoin (BTC) stronger, and the data shows that this may be what has happened. That being said, there is no way to know how much of the 30% rise in the Bitcoin (BTC) dominance percentage is due to the loss of regular Binance in the United States. 

Also, going forward this drastically changes the environment for cryptocurrency traders in the United States. One of the only options still available for United States residents to trade cryptocurrency anonymously is KuCoin, which has 452 trading pairs, although its volume is only 10-20% of Binance, resulting in far less liquidity and less optimal cryptocurrency prices. 

It is possible that a significant fraction of United States users disenfranchised by the loss of Binance will go to KuCoin, which may increase volume and liquidity. But we need to consider the possibility that, if KuCoin starts to have a ton of volume from United States residents, KuCoin will be forced by regulators to ban United States residents. 

Therefore, the loss of regular Binance in the United States is another step towards a fully regulated cryptocurrency trading environment in the United States, where full identification information is required to trade, and there are a limited number of cryptocurrencies available to trade. There will still be options like finding ways to trade peer to peer, but liquidity will be practically nill, and trading fees will be far higher, severely limiting the techniques that traders can use to profit. 

Ultimately, the loss of regular Binance is a major step towards altcoin trading dying out in the United States, which would cause altcoins to lose much of their investor base and demand, while Bitcoin (BTC) gains dominance. This is just speculation, but the rise in Bitcoin (BTC) dominance percentage from 40% to 70% since the Binance ban was announced in mid-June suggests this theory holds some water.