The quant explained what he thought was the relationship between Coinbase's spot trading volume advantage and Binance's spot trading volume advantage and Bitcoin price.
Bitcoin is reacting to changes in Binance/Coinbase trading volume
In a post on CryptoQuant Quicktake, an analyst discussed the crypto market dynamics arising from the ongoing battle between Binance and Coinbase for spot trading volume dominance.
The quant shared the graph below that shows how this battle for supremacy has played out over the past decade.
As the graph shows, Binance is by far the dominant of the two platforms when considering spot volume. This exchange hosts 5 times the volume of Coinbase.
Analysts point out that the difference between the two will be even larger if we take into account the BTC-FDUSD pair, which is not included in the data shown in the chart above.
Despite having much lower spot trading volumes, Coinbase is still not irrelevant in the market. For example, the platform is the custodian for Bitcoin spot exchange-traded funds (ETFs) like BlackRock's IBIT and Grayscale's GBTC.
There also appears to be an interesting pattern between the dominance of American exchanges and the spot price of Bitcoin. Quants highlight this trend graphically.
There have been several instances where Coinbase's spot trading volume on Binance has increased prior to the cryptocurrency's surge in value. Similarly, a decline in platform dominance appears to be leading to a decline in Bitcoin prices.
Analysts also took a closer look at the volume trends of the two exchanges using spot volume ratios, as shown below.
This graph shows that the spot trading volume ratio of Binance and Coinbase skyrocketed to very high levels in 2023, with the former's trading volume being 53 times that of the latter. The reason behind this was the zero commission system that Binance introduced for Bitcoin trading pairs.
However, although Coinbase's trading volume has increased recently, its ratios still noticeably favor Binance. This shift in the market came as news related to Bitcoin Spot ETFs began to pick up steam.
The quant concludes:
Although the dynamics between these exchanges are complex, the graph shows that the dominance of each exchange at a given time has a direct impact on the price of Bitcoin. This is a real battle between the biggest names in the market, and the competition is constant and the results are reflected in the movement of cryptocurrencies.
BTC price
As of this writing, Bitcoin is trading around $61,800, down 3% over the past week.
