How the largest cryptocurrency exchange’s initiatives help it maintain its leadership

​“There are no competitors so far.” What is the scale of Binance's influence on the crypto market



4 min

On November 14, Binance exchange CEO Changpeng Zhao announced the creation of “an industry recovery fund” to help “projects who are otherwise strong, but in a liquidity crisis.” He urged eligible companies to contact Binance Labs. According to Zhao, the initiative will “reduce further cascading negative effects of FTX.” He also invited other large companies to participate in the creation of the fund.

Zhao added that details of the fund’s work will be published later, but until then, representatives of those crypto projects that may need help can submit applications through Binance Labs. The head of Binance also encouraged “other industry players with cash” to participate in the fund. Crypto billionaire Justin Sun and BankToTheFuture CEO Simon Dixon openly responded to the offer. The OKX exchange later announced the creation of its own support fund.

Earlier, Binance launched a project to finance the field of mining and digital infrastructure providers, allocating $500 million to the initiative. The exchange invested the same amount in the purchase of the social network Twitter by Elon Musk. “Crypto is not going away. We are still here. Let's rebuild,” Zhao concluded the announcement of a “recovery fund” with these words.

“In my opinion, Binance’s initiative to create a fund is a kind of quick help, a crutch that can be put under the falling crypto market, so that it does not collapse crushingly for itself,” reasons co-founder of ENCRY Foundation Roman Nekrasov. In fact, this fund will perform the same role that Alameda and FTX took on in the summer, saving the industry that suffered from the collapse of the Terra ecosystem, the expert explains. “Now that role is without a performer, Binance was quick to fill the vacant place. We can only hope that they will be more prudent in their allocation of support funds. But in general, the market should recover — someone is bound to leave,” Nekrasov notes.

Binance’s influence

In one of the tweets, Zhao stated that Binance would publish “proof of reserves” of funds available on the platform’s wallets. This provoked other major crypto exchanges to join the initiative. OKX, Huobi, Bitfinex, KuCoin, and several other first-tier trading platforms have reported on reserves in one form or another.

Proof-of-reserves. Which exchanges confirmed their solvency after FTX’s collapse

According to senior analyst Nikita Zuborev, the creation of the fund and other emergency initiatives of Binance is an insignificant factor for private investors. Although the very fact of the existence of the fund would be useful to prevent the spread of a chain of bankruptcies due to the liquidation of marginal positions on a number of the most affected assets, the expert believes.

Binance alone occupies a huge chunk of the market, especially among beginners around the world outside the United States. The company is doing everything to associate the market only with Binance, but fortunately, this is far from the truth, Zuborev adds when asked about the extent of the exchange’s influence on the crypto market. Despite this, in the information field, Binance dominates, for this, they even acquired one of the most popular aggregators of information about the crypto market in the world, CoinMarketCap. And now continue their expansion with convenient for them interpretations of information and concealment of “unwanted,” the analyst adds.

“Now Binance is not a monopoly formally, but in fact, they offer in one window everything that is needed by both beginner and professional, trader and staker, and operate worldwide, not limited to any one region,” Nekrasov comments, adding that so far there are no noticeable competitors to the exchange with a comparable market coverage.

In the future, the emergence of a new player capable of displacing Binance is quite possible, believes Zuborev, adding that Binance has not always occupied such a position, and also wrested the first position from the previously dominant Bitfinex. “It succeeded primarily due to first-class marketing, including huge (by market standards) referral fees at the initial stage of business development,” the analyst explains.

According to Zuborev, it is not ruled out that no less promising competitor may emerge, including some of the existing exchanges. But in practice, the competition space is very narrow: the amount of fee for trading, the range of tokens, convenience of deposit and withdrawal, the convenience of the interface, and some bonuses for attracting new customers. For Binance in all these areas, there is something to strive for, so we cannot rule out the emergence of a new leader, although in practice they would have to operate at a minimum profit until they capture the necessary market share.

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