Bitcoin Develops $700 Premium on Binance US

One bitcoin is currently worth $27,600 in global markets, including on Binance’s global exchange, but on Binance US one bitcoin is currently worth $28,300.

This $700 premium ranges between $500 and $1,000, amounting to about 2.5% of bitcoin’s price, and in ordinary circumstances would have not lasted beyond a few hours.

Since April however the US branch of Binance has struggled to find a new banking partner following the collapse of Silvergate and Signature Bank, both of which were used by the exchange.

They were forced instead to user intermediaries, such as Prime Trust LLC, which held Binance’s customers funds in its network of banking partners.

For a brief period in April the exchange said dollar services would be temporarily unavailable for wire deposits and withdrawals as well as Apple Pay and Google Pay deposits. 

Its status page now shows Apple Pay, Google Pay and ACH is working, but for debit cards it states:

“Due to recent developments in the banking industry, Binance.US is transitioning to new banking and payment service providers. For some users, debit card, Apple Pay, and Google Pay deposits may be temporarily disrupted during the transition. Bank transfers (ACH) are functioning normally.”

This creates a delay in moving usd in and out of the exchange while crypto deposits and withdrawals are operating as normal, so demand for crypto is higher than usual as it is a quicker way to exit the exchange.

In combination, that means arbitragers can’t quite close the gab, with it unclear how long this situation will continue as banks might be worried about regulatory risks after CFTC sued Binance in March due to allegedly offering derivatives to US citizens.

Binance US was not sued, with this being far smaller than Binance global, handling about $150 million a day in BTC/USD volumes compared to $1.5 billion in Binance global.

The latter recently transferred 162,000 bitcoin, leading to speculations this was withdrawn from customers. However Julio Moreno, Head of Research at Crypto Quant, clarified:

“A lot of people commenting about the huge Bitcoin outflows from Binance today [7th May]. Two transactions of 117K and 40K Bitcoin respectively.

In reality, these are bitcoin sent to newly created change addresses that belong to Binance. Effective outflows are most likely just 10,100 bitcoin.”

Binance has 404,000 bitcoin in deposits in total, mostly held on one address with circa 250,000 BTC.

They moved the rest to a number of addresses holding between 30,000 – 40,000 bitcoin, and some addresses holding circa 15,000, for a total of about 160,000 BTC.

It is not too clear why they decided to move them, but Binance’s holdings have undergone a significant transformation since December when $15 billion of their deposits were in bUSD.

bUSD has been discontinued after its issuer on behalf of Binance, Paxos, settled with New York regulators and SEC.

Binance therefore now holds only $3 billion in bUSD, or 4.83% of their crypto deposits, with USDt now accounting for 30% of their holdings, up from 20% in December.

Bitfinex came up with USDt in 2015 following its own troubles with bank access. After intense scrutiny, Bitfinex eventually revealed USDt is largely fully backed according to the New York general attorney, but some of it was backed by actual crypto, primarily bitcoin.

Bitcoin is volatile, so it can be a risky asset to hold, especially in a fiduciary relationship, but the temporary de-pegging of USDc due to the banking collapses in March showed fiat, and especially bank deposits, have their own risk.

If necessary therefore, crypto can be used as reserves for a small percentage of liabilities. That would be dangerous as MT Gox showed, but it can work out as Bitfinex showed.

The difference is MT Gox was incompetently managed and hacked too, while Bitfinex had some assistance by bitcoin protocol developers.

A lack of banking access can therefore be managed, but it does come with a bitcoin premium, though Bitfinex managed it with USDt and a lack of bUSD can make it more difficult.

This is only for Binance US however, with the Biden administration seemingly moving towards forming a Coinbase monopoly for Americans as Bittrex US voluntarily liquidated in what is starting to become a two tier global crypto market.

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• Source: https://www.trustnodes.com/2023/05/09/bitcoin-develops-700-premium-on-binance-us