Binance US, the subsidiary of the world’s largest cryptocurrency exchange in the USA, announced that the SEC’s lawsuit, with the exit of market makers from the platform, revealed that concerns about liquidity reduced the market depth by 78 percent.
Market depth is an important metric that shows liquidity and the depth of order books. This refers to the volume of buy and sell orders at different price levels. The decrease in market depth means less liquidity and difficulties traders may face while executing orders.
Market makers play an important role in providing liquidity by determining bid and selling prices. However, the sudden departure of market makers on Binance.US has caused limited liquidity and made it difficult for traders to execute orders effectively.
The drastic drop in market depth is a cause for concern for traders who rely on solid liquidity. With fewer buy and sell orders, traders may face increased slippage and potential difficulties in obtaining their desired trading prices. The lack of liquidity can also weaken the overall efficiency and attractiveness of the exchange, further weakening its reputation and ability to attract users.
The SEC sued Binance last week for several alleged US securities law violations. Binance stated that it will defend itself strongly in the face of these allegations. According to crypto analyst Nansen, over $2.5 billion net outflows were made from Binance in the last 7 days. More than $112 million exited Binance.US.
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