According to a recent report by Bloomberg, Binance, the world’s largest cryptocurrency exchange by trading volume, is facing significant challenges as its market share continues to decline. 

In September, Binance’s share of trading volume in the roughly $2 trillion digital asset market fell to 36.6%, down sharply from 42.7% at the start of the year and the lowest level in four years, according to data from CCData.

Binance Spot And Derivatives Trading Hits Four-Year Lows

The drop in market share is particularly pronounced in both the spot and derivatives trading arenas. Binance’s 27% share of the spot market represents its lowest level since January 2021, while its derivatives trading share stands at 40.7%, also the lowest in four years.

Per the report, this decline can be attributed to the legal saga that the exchange has been experiencing globally since last year, but particularly in the US, which has not only had a notable impact on the exchange’s financial metrics, but has also led to changes in its leadership.

The company has been under increased scrutiny globally, following a settlement with the US Department of Justice (DOJ) last year over serious charges, including sanctions violations, which resulted in a hefty $4 billion fine. 

The fallout from these regulatory actions included the resignation of co-founder and former CEO Changpeng Zhao (CZ), who served four months in prison as part of the proceedings. However, the former CEO was released by US authorities last Friday after serving his sentence.

In an effort to rebuild trust and navigate the regulatory landscape, Binance appointed Richard Teng, a former regulator, as its new CEO. Teng has been actively engaged with regulators investigating Binance in various jurisdictions, while also appointing a new board of directors and the intentions of establishing a new headquarter.

Centralized Crypto Exchanges Face 17% Volume Drop

The report further highlights that the broader market for centralized crypto exchanges is also facing challenges, with combined spot and derivatives trading volumes dropping 17% in September. 

However, this decline is typical for the month, which is often seasonally weak, but it has resulted in the lowest monthly trading activity since June. Notably, Binance has seen the most severe market-share decline among top exchanges, as competitors such as Bybit, Bitget, and Crypto.com have begun to capture a larger share of the market.

Jacob Joseph, a senior research analyst at CCData, noted that this trend may indicate a growing confidence among crypto participants in alternative platforms that “offer similar user experiences,” including low trading fees, minimal slippage, and high market liquidity.

Despite the challenges, Binance recently achieved a significant milestone, becoming the first centralized crypto exchange to surpass $100 trillion in lifetime trading volume, according to CCData. 

At the time of writing, the exchange’s native token, BNB, currently the fourth largest cryptocurrency on the market, is trading at $545, up just 1% in the last 24 hours amid the broader market decline.

Featured image from DALL-E, chart from TradingView.com