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Binance’s spot trading volumes register a colossal increase over the previous quarter

Photo of: Dennis Ramos
by Dennis Ramos

Binance is dominating in every sphere of the cryptocurrency industry. The latest news that poured in just mentioned that Binance has achieved an all-time high spot trading volume in the third quarter of 2020 as per the reports of Block Research.  The exchange has registered some robust growth figures to the tune of 110% for its spot trading volume. In comparison to its previous quarter which stood at $146.3 billion, the Q3 trading volume was at $306.6 billion which is a remarkable growth by any standards. It also points out that at an increasing pace, more and more retail investors are rushing to Binance for trading cryptocurrencies. 

Source: The Block Research

Observing the above infographic we can see the Q3 bar the tallest standing bar. Right from the beginning of the year, the numbers were robust. The Q1 trading volumes show a figure of nearly $152.7 billion traded but right in the next quarter when the impact of the pandemic was the strongest worldwide, there was a dip but a slight one to $146.3. And now when the markets look hunky-dory in terms of user sentiments, we see increased trade activity thereby taking the value to a whopping figure of $306.6 billion. 

The growth story of Binance does not stop here. The exchange also has witnessed remarkable growth figures in its future’s trading platform. In the third quarter, the exchange’s future trading volumes have crossed the $483 billion mark pointing towards a healthy rise of 43.5% quarter over quarter. 

Setting aside these achievements, Binance also has the largest BNB burns in terms of dollar value. The exchange seemingly has burned $68 million worth of BNB, its native token from circulation. This is an easy 12.% increase from the previous quarter. The burning of the BNB tokens is undertaken by Binance based on its crypto-to-crypto trading volumes. 

Understanding the difference between Binance’s spot trading and futures trading

In the case of a futures market, the prices on the exchange do not have any mechanism for instantaneous settlement compared to a traditional spot market when there is a liquidation in position. Future prices are also different to spot market prices because of carrying costs and carrying returns. Similar to several futures markets, Binance utilizes the system which motivates the futures market to cluster to the mark price through something called funding rates.

The premier futures market, Chicago Mercantile Exchange Group (CME Group), also presents to the user a traditional futures contract. But contemporary exchanges like Binance are now moving towards something called a perpetual contract model. When a perpetual futures contract trades on a premium which is higher than the spot markets, long positions have to eventually pay shorts because the funding rate is positive. This situation drives the price down because the longs shut off their positions and new shorts get opened. 

Summing up

Binance’s main source of revenue has been on the transactional side as it has always depended on its spot volumes and the fee income. Block Research has said that the exchange has also started earning revenues from its core products like derivatives trading, lending, and peer-to-peer trading in China.