Binance, the world's largest cryptocurrency exchange, is facing intense scrutiny over its deep on-chain connections and persistent dominance of market liquidity. Analysis reveals a complex network where Binance historically funded and set up major exchanges like Coinbase and Huobi, suggesting a centralized flow of funds that could influence market stability.
Tyler Reed, founder of TruthLabs, highlighted concerning on-chain links, noting that "all of @coinbase public exchange address' were originally funded/setup thru #binance and #crypto.com." These connections extend to former FTX affiliates, leveraged token deployers, and developers linked to large-scale rug pulls, such as Multichain's team. Reed warns these opaque networks indicate potential liquidity compression and broader systemic risks for the crypto market.
Concurrently, data from CryptoQuant underscores a persistent structural reality: Binance continues to control between 65% and 80% of total market volume across both spot and derivatives markets since early 2023. This dominance is most pronounced during periods of market stress and volatility, where Binance absorbs liquidity and remains the primary venue for leveraged, directional capital that sets prices. While other exchanges see volume spikes, they fail to sustain momentum, playing a supporting rather than price-setting role.
The revelations come as Binance confronts the U.S. Securities and Exchange Commission (SEC) in court, with analysts warning that the platform's opaque history and concentrated liquidity pose significant risks. The intertwined nature of these findings—spanning on-chain funding ties and overwhelming market share—paints a picture of a market where real liquidity and influence remain heavily centralized on a single platform, challenging the industry's decentralization ethos.
