Kaiko: Bybit becomes the second-largest crypto exchange after Binance

What’s new? Experts of the analytics company Kaiko in a new market report have noted a sharp increase in the share of the centralized crypto exchange (CEX) Bybit. Thus, since October last year, it has grown from 8% to 16%. In March of this year, Bybit overtook Coinbase and became the second-largest exchange after Binance.

Kaiko’s report

What else is known? Analysts note that the launch of spot bitcoin exchange-traded funds (ETFs) in the United States on January 11 significantly increased the volume of global crypto trading. At the same time, exchanges have not benefited equally from the rally that began back in October.

While Bybit’s market share doubled, Coinbase’s share only added 1% to reach 8% over the same period. OKX saw its share increase from 5% to 8% between October and June, while South Korea’s leading Upbit saw its share drop from 9% to 4%. Smaller offshore exchanges also fell from 13% to 10%.

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Leading Binance also saw its share drop from 60% to 54%. Analysts called the exchange’s decline in dominance unexpected, given its $4,3 billion settlement with US agencies in a money laundering case at the end of 2023, which potentially reduces regulatory risks.

Kaiko allowed the possibility that Bybit’s sharp rise in share is due to its commission fees, which are among the lowest in the industry. However, Binance and OKX also offer low fees, and many exchanges run zero-fee promotions and other incentive campaigns on an ongoing basis.

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Bybit launched fee-free trading for USDC stablecoin pairs last February, while Binance ran a similar promotion with stablecoins TUSD and FDUSD throughout last year. This suggests that low fees contribute to Bybit’s competitiveness, but are not the sole reason for its growth.

Analyzing spot trading volumes by asset shows that the increase in volume on Bybit has been driven by both BTC and ETH, whose share on the exchange has grown from 17% to 53% since last year. In contrast, Binance has seen a larger increase in altcoin volume, with the share of BTC and ETH dropping from 59% to 43%.

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Bybit’s growing share of the spot market is also supported by its rapidly growing derivatives supply. Bybit has secured the second-largest derivatives market after Binance in 2023.

Although the market share of open positions in Bybit futures has remained flat since October, the first half of 2023 has seen significant growth. This may indicate that the exchange has benefited from Binance’s regulatory problems, Kaiko noted. OKX’s share of the derivatives market also fell to 15% from 25% at the start of 2023.

In March, Bybit raised fees on derivatives trading in Russia, Armenia, Ukraine, Tajikistan, Turkmenistan, Azerbaijan, Moldova, Belarus, and Georgia.

The same month, the Hong Kong regulator threatened Bybit with enforcement action for operating without a license in the local market.