By
Chimamanda U. Martha
April 25th, 2024
Over the summer, Binance.US and Binance offered free trading in multiple Bitcoin pairs which resulted in an 8% growth in the market capitalization of BUSD.
Ahead of the long-anticipated Ethereum Merge, Binance has announced that it is waiving trading fees for customers trading the ETH-BUSD pair till September 26.
With Ethereum looking to migrate from PoW to PoS, Ethereum transactions are bound to increase in the short term. Thus, Binance’s move may be an attempt to pull more clients to its platform. Research analyst in Julius Baer, Sipho Arntzen, affirms that it is likely a market grab strategy.
This will not be the first time Binance forgoes its chief source of income. Over the summer, Binance.US and Binance offered free trading in multiple Bitcoin pairs, including EUR and GBP. According to CryptoCompare, the initiative led to an 8% growth in the market capitalization of BUSD.
Binance Dominates Market Share
Interestingly, Binance has been dominating the market share all year long. The exchange currently holds a 55% share of the market. Compared to its closest rivals, Coinbase and FTX which hold 10% each, this is huge.
In the US, while other exchanges saw trading volumes plummet by 50% and more in July, Binance.US witnessed a 2% reduction. The firm’s daily trading volume stood at $187 million. There are suggestions the stability was traceable to its zero fees for bitcoin policy at the time.
Now, the firm seems to be trialing the same with Ether, and on a larger scale. Binance noted that while it may miss some fees, it has reserves to fall back on.
Is a New Era of Zero Trading Fees Close?
According to Chief Executive at GlobalBlock Digital asset Trading, the approach has been seen with traditional finance in the past. He said, “… a well-capitalized newcomer seeks dominance with the enticement of commission-free trading for a limited period.”
Arntzen agrees, stating that free trading may soon become the norm rather than the exception given past trends with traditional finance.
Recall that Robinhood started free stock trading in 2013 and then free options trading in 2017. It also instituted free crypto transactions in 2018. What followed was that US stock brokers gradually reduced their fees until zero-fee became the norm.
Could crypto trading be headed in the same direction? Possibly. However, if the trend from traditional finance suggests anything, zero trading fees are still a few years away.