US dollar shortage drives down bitcoin, ether prices on Binance.US
There are no fresh dollars flowing into Binance.US these days, which makes for odd fiat prices across major cryptocurrencies
https://blockworks-co.imgix.net/wp-content/uploads/2023/03/binancechina-1.jpg
The US dollar has become expensive on Binance.US since it lost its banking partners last month, with fiat pairs for cryptocurrencies trading at nearly 8% discount.
In effect, the US dollar has depegged from the stablecoins — the opposite of what usually wracks crypto nerves.
Liquidity lower than demand has apparently pushed USD prices higher on Binance.US. Just 0.93 of a pegged stablecoin like tether (USDT) or USDC will get you one whole US dollar on the platform.
That means a whole US dollar would fetch 1.078 USDT, rather than one flat. US dollar values began rising around June 20 — after fiat deposits and withdrawals were shut down.
Over at Coinbase, the US dollar trades at a cool one whole stablecoin. Top stablecoins have not varied greatly from their pegs on any other platform, at least not since Circle dropped to $0.94 in March, as the brief US banking crisis struck Silicon Valley Bank.
So, it’s clear that US dollars have become popular on Binance.US after it halted over-the-counter trading and suspended US dollar deposits and withdrawals in early June.
With the dollar trading at a premium, Binance US crypto prices are all out of whack.
Buying bitcoin (BTC) with USD? You’ll pay just $27,900 for a whole one, but if you’re buying with tether, you’ll fork out more than 30,800 USDT — the same price reflected across crypto markets.
Similar discrepancies appear in Binance.US’s dollar markets, including those for ether (ETH), cardano (ADA), polygon (MATIC) and dogecoin (DOGE).
CoinGecko reports many Binance.US dollar markets are much shallower than their stablecoin counterparts.
- Its BTC-USDT market shows 2% depth either way is around $700,000.
- That means a $700,000 trade either way would move prices by 2%.
- The BTC-USD pair’s depth is $190,000 in the positive and just $90,000 for the negative.
About $2 million in BTC-USD volume has been traded on Binance.US over the past day, and about $1.6 million in USD-USDT. A Binance US spokesperson did not immediately return a request for comment.
No ways to arbitrage US dollar on Binance.US
Binance.US initially warned it could halt all USD trading pairs June 13, pending a potential asset freeze requested by US regulators.
Any USD balances were to be converted to stablecoins after June 15. Neither outcome came to pass after striking a deal with the SEC.
Price differences like these normally present opportunities for arbitrage — exploiting market variances for profit.
But to do so would take bringing in US dollars, acquired for $1, to sell at a markup on Binance.US. That’s currently impossible as users can no longer deposit or withdraw fiat.
Binance.US has struggled with odd pricing for months now. In May, BTC and ETH traded at more than 3% premium compared to rival platforms due to poor liquidity.
That gap closed within about two weeks, although the current situation may last much longer.
Updated Jul. 10, 2023 at 11:41 am ET: Corrected exchange rates.
Get the news in your inbox. Explore Blockworks newsletters:
- The Breakdown: Decoding crypto and the markets. Daily.
- Empire: Crypto news and analysis to start your day.
- Forward Guidance: The intersection of crypto, macro and policy.
- 0xResearch: Alpha directly in your inbox.
- Lightspeed: All things Solana.
- The Drop: Apps, games, memes and more.
- Supply Shock: Bitcoin, bitcoin, bitcoin.
