A recent report has looked into just how quickly Binance revenues may be declining.
Available trading data provides key insights regarding the status of Binance’s crypto-focused operations and its BNB digital token.
As covered earlier this month, the WSJ had released an extensive report which revealed that despite China’s ban on cryptocurrencies, the country is still the largest market for Binance.
As per internal documents, which were examined by the report’s authors, along with insights obtained from current and ex- workers, Binance in May 2023 facilitated $90B worth of trades for China-based traders.
The WSJ’s sources further noted that those transfers represented around 20% of Binance’s aggregate trading volumes, which is far greater than the volume for even South Korea (roughly $55 billion), and third-placed Turkey (accounting for around $40 billion).
The Journal report revealed China’s vital role in Binance’s operations, after the nation had banned its services back in 2017, and had made crypto trading illegal a couple years ago.
However, the WSJ report also offers insights to help with assessing Binance’s yearly earnings.
Binance CEO Changpeng Zhao has not shared Binance’s actual turnover for a number of years, and financial details for the exchange operator are so vague that digital asset, blockchain analysts are not sharing any kind of estimates/projections.
Despite this lack of clarity, it is evident that the ongoing crackdowns of Binance and the considerable decline in total trading of virtual currencies has negatively impacted the firms’s overall volumes.
The question mark remains on if the negative impact is so drastic that Binance, which CZ claims is turning a profit, could soon begin to record substantial losses.
And if Binance is unable to generate adequate income to pay for its sizable rent, employees, vast data-centers, compliance-related expenses, and exorbitant marketing bills, then it may have to look into tapping its deep reserves to make up for the shortage of funds.
It’s worth noting that the firm’s reserves are mainly self-issued, and based in its BNB coin – which if Binance decides to sell to take care of operating costs-is susceptible to a sharp decline that might send major shockwaves acoss the crypto ecosystem.
Notably, the WSJ’s report reveals that China’s $90B in trading for May represented 20% of the company’s total business volume, suggesting that its volumes for that paticular period had reached $450B.
The update indicates that the $90B consists of spot as well as futures trading volumes.
It’s worth pointing out that on a yearly time-line, Binance’s revenue may be roughly $5.4T (12 months x $450 billion). Despite appearing to be quite large, this figure is actually quite low and may be a sign of an eventual breakdown of Binance’s earnings, and there is a fair chance it may be recording significant losses already.
But the WSJ pointed out that the $90B estimate for China does not actually include major trades that were completed by a small number of large traders.
The report also does not attempt to provide an approximation for just how much cryptocurrency those large-volume traders are purchasing and selling via the exchange.
This suggests that the mainland China figure is considerably larger than the $90B. But it remains unclear just how much exactly.
CCData has offered different figures compared to what Fortune has estimated. A reporter from the outlet had asked CCData to offer an extensive breakdown for Binance from the yea 2021 all the way through to the end of July 2023.
A CCData analyst said that they are “plugged into the exchange.”
They claim to obtain the data “directly from Binance, trade by trade.”
CCData revealed trading volumes that were a lot greater than the annualized $5T+ suggested in the Journal report, but when we do not account for those extremely large traders, then that makes data from such sources quite challenging (and may even be unreliable) to compare.
Despite this, the CCData (formerly known as CryptoCompare) figures point towards a downward trend in Binance’s current operations.
This may be due to a market/industry-wide decline in cryptocurrency trading volumes since the summit back in 2021, and more recently, a drop in the exchange operator’s share of that dwindling market.
As we look back, it is clear that in 2021, cryptocurrency transactions were experiencing new highs, hitting $74T for that financial year. This, according to CCData estimates.
As expected, Binance had accounted for $31.7T or well over 40% of those trades.
But that bull market cooled off quickly and trading volumes had declined by more than 33% to just $48.7T. While Binance had managed to increase its share, the wider retrace had considerably lowered its take by over 25% to about $23.3T.
And this year, the overall scale of all international transactions continued to decline.
However, Binance received a large surge due to the spectacular collapse of its FTX.
From January-March 2023, Binance’s crypto trading went against the declining market trends by posting the yearly dollar-rate that was recorded in the previous year.
The notable point was seen back in March, when the firm had announced the end of a special promotion, beginning in July 2022, enabling spot clients to acquire and sell BTC, via the most widely-used crypto tokens, without having to pay a fee.
Between April and the end of last month, Binance experienced a major downturn in momentum.
The firm’s yearly estimated volumes declined to just under $17B per year, a fall of approximately 28% from the 3 months of 2023, when measured against figures from 2022.
Back in May of this yea, CCData estimates that Binance recorded $1.3T in trading volume, which is 3x the figure obtained from the Journal’s update (where China made up 20% of Binance’s volume for that particular month).
As repo4ted by Fortune, Binance has, for the past 4 months, completed an annualized $2.8T in spot transactions, and $14Txin futures volumes.
According to the media outlet’s estimates, the fees that Binance obtains, after those large discounts, could be 7 bps for spot and 2 bps for futures.
And if these figures are accurate, then the earnings from the former are about $2B, and $2.8B from the latter. But the report and analysis shared by Fortune estimates actual earnings to be a lot less than $5 billion. That’s because Binance is providing a large incentive for its VIP clients. Due to these promotions, Binance may be earning a lot less in total revenue.
In response to these findings, a Binance rep said:
“As a private company, we don’t share financial information publicly, but your estimates are not correct.”