One quantitative analyst explained how there appears to be a relationship between Coinbase vs. Binance spot volume dominance and the price of Bitcoin.
Bitcoin has been reacting to Binance/Coinbase volume changes
In CryptoQuant Quicktake mailan analyst discussed the dynamics in the cryptocurrency market that arise from the battle taking place between Binance and Coinbase for spot volume dominance.
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Quant shared the infographic below that shows how this war for dominance has evolved over the past decade.
As the chart shows, Binance was the most dominant of the two platforms when looking at spot volume. The exchange hosts five times more volume than Coinbase.
The analyst notes that the spread between the two will be higher when considering the BTC-FDUSD pair, which is not included in the data shown in the chart above.
Despite the decline in spot volume, Coinbase is still irrelevant to the market. For example, the exchange is the custodian of Bitcoin exchange-traded funds (ETFs) such as BlackRock's IBIT and Grayscale's GBTC.
There also appears to be an interesting pattern between US stock market dominance and Bitcoin spot price. Quantitative has highlighted this trend in the chart.
There have been some instances where spikes in spot trading volume for Coinbase versus Binance preceded spikes in the value of the cryptocurrency. Likewise, a decline in platform dominance appears to have led to declines in the price of Bitcoin.
The analyst has also discussed the trend in trading volumes on the two exchanges more closely, using their spot volume ratio, as shown below.
The chart shows that the spot volume ratio between Binance and Coinbase has risen to very high levels in 2023, with the former reaching 53 times the volume of the latter. The reason behind this was the zero fee scheme introduced by Binance for Bitcoin trading pairs.
However, Coinbase trading volume has been rising recently, although the ratio is still significantly in favor of Binance. This market shift emerged as news about Bitcoin ETFs began to intensify.
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The quantum concludes:
The dynamics between these exchanges are complex, but the charts show that the dominance of each exchange at specific times has a direct impact on the price of Bitcoin. It is a real battle between the biggest players in the market, where competition is ongoing, and the result is reflected in the movements of the cryptocurrency.
Bitcoin price
At the time of writing, Bitcoin is trading at around $61,800, down 3% over the past week.
Featured image by Kanchanara on Unsplash.com, CryptoQuant.com, chart from TradingView.com
