Report: 48% drop in cryptocurrency trading volume was caused by the crisis on the Binance exchange

A recent report from K33 Research highlights a significant 48% decline in cryptocurrency trading volume, primarily attributed to the ongoing crisis at Binance, one of the leading cryptocurrency exchanges.

This drop has been especially noticeable in the average weekly spot bitcoin trading volumes on Binance, which have plummeted by 57% since September 1. In contrast, other spot exchanges have seen no significant changes during this period.

The analysts at K33 Research suggest that this decline in trading activity on Binance can be linked to the ongoing investigations by the US Department of Justice and the US Securities and Exchange Commission (SEC) into the exchange's operations. These investigations may have discouraged market makers from actively participating in trading on Binance.

While some market makers may have migrated to other exchanges, it is evident that Binance's troubles have had an adverse impact on overall market volumes, according to the researchers. This is further emphasized by the fact that fiat currency trading on Binance has witnessed a substantial 60% decrease since the start of the year, and cryptocurrency derivatives trading on the exchange dropped by 22.5% in August compared to the previous month.

K33 analysts also point out that in 2023, the cryptocurrency market is increasingly influenced by factors specific to the cryptocurrency realm itself. These include a decrease in short positions, news related to ETFs, and pressures from sellers amid bankruptcy and regulatory actions by the U.S. government targeting the crypto industry. Notably, the correlation of Bitcoin with traditional financial indicators like the S&P 500 and DXY indices has significantly decreased compared to earlier in the year, indicating a reduced reliance on traditional market dynamics.

Regarding the upcoming Federal Reserve rate meeting scheduled for the evening of September 20, K33 suggests that it is unlikely to have a prolonged impact on the cryptocurrency market. While some volatility may occur during and after the meeting, it is unlikely to result in sustained directional effects. The research underscores that, in the current landscape, making trading decisions based on macroeconomic data is becoming less viable due to Bitcoin's low correlation with traditional assets.