Binance.US Offers Bitcoin at $700 Premium, but Why?

Bitcoin has been trading at a $700 premium on Binance’s US exchange for four days. However, analysts can’t agree on the underlying cause. They differ especially on the role of market makers and pending regulatory action.

The Bitcoin price was $700 higher on Binance.US on Thursday, offering a unique arbitrage opportunity for traders. The cryptocurrency has been trading at a premium on Binance’s US exchange for four days.

Binance Differentials

Currently, the price of one bitcoin is $28,000 on global markets, such as Binance’s global exchange. However, on Binance.US, one bitcoin costs $28,300, indicating a $700 premium. This excess cost represents about 2.5% of the bitcoin‘s value.

The premium first appeared on Saturday morning and has remained ever since. This price difference has been impacting funding rates on other exchanges, including Bitmex.

Traders can usually profit from the difference in Bitcoin price between Binance.US and other exchanges by buying at a discount and selling at a premium. Binance and Binance.US are separate platforms to cater to America’s unique regulatory environment. They also offer different cryptocurrencies for trade. 

Why the Difference?

Traders have been speculating about the gap, which is unusual in its length. Some have suggested that this premium may be the result of market makers leaving Binance.US. 

Market makers are institutional traders who provide liquidity on exchanges by creating buy and sell orders for a cryptocurrency using their own capital to make a profit. The departure of market makers can lead to reduced liquidity. In turn, that can cause price imbalances.

However, it might not be as easy to arbitrage in this particular case.

One Twitter user, @fewseethis, speculated that news of incoming regulatory action could have spooked them off. “IF there is some sort of gov action against binance US incoming AND market makers who usually do business there know about it THEN it’s possible they left and there isn’t enough liquidity & possibilities for arbitraging are diminished.”

Although another Twitter analyst believes the departure of market makers didn’t explain the phenomenon. 

“There doesn’t seem to be any strong indication that [market makers] are leaving,” said @_FabianHD. “Orderbook depth hasn’t widened considerably vs other markets and total assets have been steady throughout the month.”

After looking at the five biggest market makers on Binance.US, he concluded there was “nothing out of the ordinary.” Outflows don’t “seem to indicate a rush to exit the exchange just yet.”

Conor Ryder from Kaiko Data agreed, citing “no change in liquidity.” Speaking about Binance.US, he continued: “After that it’s theories, mine is just its more likely a BTC demand issue on an illiquid exchange struggling on the USD side.”