BTC, ETH and BNB Trade At A Premium On Binance.US After Court Orders Asset Freeze
Fears Over Fiat Withdrawals Could Be Driving Users To On-chain Assets
By: Jeremy Nation •Crypto News
Bitcoin, Ethereum, and Binance’s native BNB token are trading for a premium on Binance.US, compared to the wider market.
The deviation comes amid legal charges from the Securities and Exchange Commission and a court order earlier today to approve a motion to freeze assets for Binance companies BAM Management and BAM Trading.
As of 2130 ET, Bitcoin is trading roughly 2.5% higher on Binance.US versus its international counterpart. The premium rose as high as 7% earlier in the day when news of the asset freeze first broke.
Similarly, Ether is trading 2% higher, while Binance’s BNB token has closed the gap to 1%.
"It may be that users think they won't be able to get their dollars, or other more speculative cryptocurrencies, out of Binance US, so they are converting to Bitcoin and other assets they would rather hold,” Steven Lubka, managing director at Swan Bitcoin, a trading firm, told The Defiant.
Users may also be anticipating a trading shutdown, according to Lubka. “Arbitrage traders may also be unwilling to deposit funds to take advantage of the spread," he said.
“It's estimated that Binance and Binance US have experienced over $1.2bn in net withdrawals since the lawsuit announcement,” said Nauman Sheikh, managing director of Wave Digital Assets, an SEC-registered advisory firm.
“Consequently, BTC and ETH are trading at a significant premium. Normally, this premium would be arbitraged away as traders deposit BTC and ETH on Binance.US to capitalize on the higher price. However, due to current exchange risks, the premium persists,” Sheikh told The Defiant.
‘No Need To FUD’
Now, as Binance CEO Changpeng Zhao is ordered to respond to a U.S. District Court summons, he maintains that he doesn’t need to appear in person and said there is, “No need to FUD.”
CZ’s sentiment would appear to be shared by Binance traders, who, despite the news, have not withdrawn significant amounts from the centralized exchange, on-chain data show.
Some observers pointed out that investors’ reactions to the alleged commingling of assets contrasted sharply with the collapse of FTX last year.
Under pressure from the SEC, Binance.US said it would streamline its buy, sell, and convert services, pause its OTC trading terminal, and that deposits and withdrawals continue to function as normal.
In addition, effective June 8 at 9am PDT, Binance.US will delist a number of USDT, BTC, and BUSD trading pairs.
Long Term Implications
In the long run, a regulatory crackdown on Binance may mean “a slowdown in VC funding for crypto companies, and the offshoring of the crypto industry,” said Lubka.
The legal proceedings to follow may go swiftly for Binance if the company did “outright illegal things with customer funds,” according to Lubka, who added that a lawsuit against Coinbase may be dragged out in court.
With the loss of trading pairs on Binance.US, users may pivot towards DeFi platforms, according to Sheikh.
“Decentralized exchanges (DEXs) offer a wider selection of pairs compared to the alternative US-based centralized exchanges,” said Sheikh, adding that “US investors, particularly retail, will not have access to foreign exchanges, so their options are limited.”
Still, Sheik warns that a migration to DeFi may yet “be tempered by the regulatory headwinds.”