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Binance DEX and co. accounted for only 0.01% of 2019’s trading volume

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TokenInsight’s latest 2019 Cryptocurrency spot exchange industry annual report evaluated the overall trading performance of centralized and decentralized exchanges across the world.

According to the report, the market activity of centralized exchanges was fairly inactive during the first quarter of 2019. However, this was followed by a sharp incline during the second and third quarter of the year, before the momentum died down again.

Source: TokenInsight

With respect to monthly valuation, a gradual rise and steady decline can be observed in the charts. The average daily trading volume registered was around $39 billion. The numbers were pretty decent and it is understood that the profit of exchanges was largely dependent on these volumes. However, considering the amount of wash trading involved in some of these exchanges, profitability might have been lower than expected.

The chart suggested that trading volume continued to shrink post-July and that the transaction activity on derivatives exchanges such as BitMEX doubled over a majority of spot exchanges. The report added,

“With the ranking of the reported volume changing over time, the wash trading problem is still

not resolved.”

Different exchanges have different levels of wash trading volume as a series of research reports suggested that the percentage of legit transaction volume was only 3 percent in early 2019. The discovery of wash trading has been taken into account by multiple exchanges, but according to the report, the issue should not be taken lightly going forward.

Addressing the question of decentralized exchanges, the total volume acquired by these entities was marginally above $1.7 billion. The total volume only accounted for 0.01% of the entire market, a figure that indicated that DEX remained a minor part of the industry.

Most notably, Binance DEX was launched in April 2019, with DEX holding many advantages over centralized exchanges. The idea of anonymity and security was properly implemented, but the lack of significant volume suggested that the DEX industry is far away from attaining maturity in the ecosystem. The report added,

“After the launch of Binance DEX, the average daily trading volume has become the mainstay of the market. However, the limitations of the application of digital assets and the incompleteness of the ecological landing have formed substantial restrictions on the decentralized exchange industry.”

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Binance CEO says Peter Schiff is helping in promoting bitcoin

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The CEO of Binance, Changpeng Zhao, tweeted that he thinks Peter Schiff is doing a great job to promote bitcoin. Peter Schiff had revealed that he lost access to his bitcoin wallet after confusing his PIN for the password.

Peter Schiff is a well-known critic of cryptocurrencies, particularly of bitcoin. Earlier last week, he tweeted that he lost access to bitcoins that were gifted to him by someone after his wallet stopped recognizing his password. He took the opportunity to thrash bitcoin once again.

“We need more of these types of negative voices.”

The CEO of Binance, Changpeng Zhao, tweeted, “I think Peter is doing great to promote bitcoin. He probably does not realize that given his illogical reasoning, most people will do exactly opposite of what he says.” He added that we need more of these typed of “negative” voices. Gold advocate Peter Schiff had twitted criticizing bitcoiners saying, “Bitcoin bugs still don’t know the difference between Bitcoin and gold.”

“Maybe he is Satoshi.”

Binance CEO Changpeng Zhao jokingly replied to one of the comments on tweets saying, “maybe he is Satoshi.” Peter Schiff has been able to get attention from the crypto community with his negative remarks about the crypto community. Earlier, Ethereum founder Vitalik Buterin tweeted in support of Peter saying that we can and should create better wallet tech to make security better.

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Tenth Quarterly Burn Decouples BNB from Binance Profit

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Binance’s tenth quarterly BNB burn had analysts discussing the exchange’s continued rise in implied profits despite a supposedly slower quarter. 

Binance BNB Burn #10 and Presumptive Profit

The quarterly BNB burn has become something of a market indicator for the health of the broader crypto industry.

Binance’s tenth burn of over 2.2 million BNB tokens removed almost $40 million worth of BNB from the market. The burn represented “activity across Binance spot, margin, and futures exchanges, as well as the various solutions, divisions, and partners that use BNB” for Q4 2019.

With its longstanding policy of destroying 20 percent of its profits to generate value for its users by shrinking the supply of BNB, the profits of the infamously secretive exchange have always been reverse-estimated from the burn.

If it burned almost $40 million worth of BNB, for example, then that represents 20 percent of its presumptive profit of around $200 million.

The tenth burn meant four consecutive quarters of profit growth and was Binance’s 3rd largest ever in BNB terms and the 2nd largest in U.S. dollar terms. During a sluggish Q4, it was quite a feat. 

Arca’s Interpretation

Digital asset investment management company Arca calculated Binance’s profits as returning to circa 2017 levels at $188 million:

The investment firm arrived at an implied earnings estimate from the profit figures based on Binance’s volumes and fees:

In the exchange’s burn announcement, CZ asserted that:

“Binance Futures now regularly surpasses the Binance Spot exchange in terms of daily trading volumes, even when we only offered Bitcoin perpetual contracts. I’d say that Futures is the biggest catalyst for our coin burn figures this quarter and in the succeeding quarters to come.” 

That was called into question by Arca’s Research Analyst Alex Woodward, who felt that it didn’t tell the full story. Assessing Binance’s revenues has become an imprecise art since it introduced futures and margin trading.

Volumes were far lower in the spot market than they were in 2017 when Binance was last earning the same kinds of revenue figures.

Binance volumes over time
Courtesy Alex Woodard, Twitter, Binance trade volume over time

Messari’s Interpretation

Analytics firm Messari originally came to similar conclusions about Binance’s implied profits, adding that “growth in burned tokens was fueled by the launch of Binance Futures last year which now regularly exceeds spot volume.” 

That was before being corrected by The Block’s Larry Cermack. Cermack pointed out to everyone that “Binance changed their

whitepaper last summer and no longer burns BNB based on profit.” 

BNB whitepaper change
Courtesy Larry Cermak, Twitter

Messari’s Ryan Selkis quickly identified his mistake and the post has since been updated.

Why Was the Whitepaper Changed?

While CZ has been silent on the issue, the amendment made to Binance’s BNB whitepaper was no doubt in anticipation of its U.S. ambitions.

If the price of BNB can be connected to Binance’s profits or revenues directly, or if analysts have cause to assess the price of BNB based on Binance’s presumptive profits, the token starts to look like a security.

Binance addressed that potential problem in advance and failed to notify the analysts, because it has no obligation to do so and because signaling the change could be easily misconstrued.

Instead, Binance is likely more concerned with Chainalysis’ recent accusations that the company platformed the exchange of over 25% of all illicit crypto in 2019.

SEC Position Leaves Public in The Dark

Binance’s whitepaper change burned analysts standing around the BNB fire.

But there remain longer-term transparency concerns, largely caused by the SEC’s “regulation-by-enforcement-action” approach to the industry. Until the sector enjoys the regulatory clarity it sorely deserves, Binance can burn as many or as few BNB tokens as it wants and refuse to connect the amount to any meaningful metric. 

By distancing the performance of BNB from Binance’s profitability, the exchange has taken an important step toward ensuring it is in compliance with U.S. regulations.

As Cermak tweeted:

“CZ told me back then: ‘We also removed the profit language because some regions tend to associate profits with securities, and we would like to distance BNB from that. So going forward, we plan to describe the burn this way, and burn what we burn.’”

The amount of BNB burned may have some relationship with Binance’s profits, revenues, or trading volume in the future. Those connections will be made regardless, as analysts work to make sense of the numbers.

But the tenth burn, which, in CZ’s words, represented the exchange’s “activity” for the quarter, is a sign of ambiguity to come.

Public access to Binance’s data will likely be the biggest casualty in the grey regulatory environment in which crypto currently operates.

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Binance’s P2P merchant program goes live

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  • Binance cites the increasing demand for global users and a need for higher liquidity as reasons for the launch.
  • Merchants on the Android and IOS-enabled platforms earn money when they post fiat currency trading ads.

In a recent press release, crypto exchange Binance announced the launch of its Peer-to-Peer (P2P) Merchant Program, a user-oriented fiat currency trading platform. It stated the reasons for the creation of this platform to be increasing demand for global users and a need for higher liquidity.

Binance CEO Changpeng Zhao said:

In the past quarter, there has been increasing growth in trading volumes on Binance P2P platform, and we have constantly received requests for more fiat-to-crypto access from our global community. To meet the growing users

demand, we are seeking credible merchants for Binance P2P trading platform globally.

Binance has witnessed more than 30% growth in trading volume over the past month, according to Coin360. With over 18 million users, the exchange boasts the largest average monthly traffic. When retailers and merchants on the IOS and Android-enabled platform post fiat currency trading advertisements, they earn money. Binance provides users with support and doesn’t charge transaction fees. 

While Binance.US released its app earlier this month, Binance launched its P2P trading platform in October 2019. At the time, merchants could only join through invitation and referral. Now, however, the merchant program is available through open enrollment. Reportedly, the user experience quality is controlled through an “elimination mechanism.” Binance says that promotional activities will be available to the users in the future. 

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