The Commodity Futures Trading Commission (CFTC) created havoc in the cryptocurrency industry with its recent lawsuits against Binance and related entities. As the world's largest crypto exchange, Binance has been attracting a strong following from US-based institutions due to its ability to provide liquidity for cryptocurrency trading. As trading volume data indicate, US-based investors have been taking full advantage of Binance’s liquidity options. According to research analysis from Kaiko, spreads for Binance are much tighter than the competition, at 36 times tighter than Binance.US and 8 times tighter than Coinbase. 40% of the trade volume on Binance happens during US trading hours, surpassing the amount that Coinbase contributes during the same period.

Gamers such as Radix Trading, a Chicago-based firm, also found ways to use Binance to actively build and sell large positions without encountering the same restrictions that domestic markets put in place. The CFTC’s lawsuit serves as a warning to other US institutions, and it could potentially impact the liquidity of all cryptocurrency markets. These complaints could bring a significant hit to the liquidity options in the cryptocurrency market, and force some large US trading desks to lay low due to the temporary uncertainty. Despite the risk of backlash, it looks like liquidity was the primary factor that drew institutions to Binance, and the market may suffer for its ability to provide better liquidity than US-based competitors.



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