(Bloomberg) -- Liquidity at one of the most prominent cryptocurrency exchanges has worsened in the wake of shocking regulatory moves by U.S. officials.
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The bid-ask depth for Bitcoin on Binance.US, the exchange owned by Binance Holding Ltd.'s Changpeng Zhao to serve US clients, has shrunk dramatically, according to researcher Kaiko. That happened after the US Securities and Exchange Commission accused Binance and its CEO of mishandling client funds, misleading investors and regulators, and violating securities rules. Binance has disputed the allegations.
โMarket makers are obviously extracting liquidity from the exchange,โ said Conor Ryder, a research analyst at Kaiko. โThe worsening of US liquidity is something that has been unfolding over the course of a few months, but this seems to be the final straw for liquidity on Binance.US.โ
The bid-ask spread is the difference between the prices quoted for an immediate sale and an immediate purchase of an asset, futures contract, or currency, including digital ones.
On Monday, the SEC filed a series of alleged violations against the world's largest cryptocurrency exchange, Binance, and its leader. Binance called the allegations "disappointing" and said that he had engaged the regulator in good faith negotiations to resolve the matter. He also said that the SEC erred by not providing clarity on the rules for digital assets.
A Binance representative did not immediately respond with a request for comment.
Binance has seen net outflows following the SEC news. It registered the eighth largest net outflow on record, of around 14,000 Bitcoin, according to Glassnode. Still, the researcher added that by assessing this trend relative to the balance held on Binance exchange addresses, the impact can be seen to be minimal.
US regulators have been cracking down on entities in the crypto space following the collapse last year of several formerly major participants, including the FTX exchange. The SEC also accused Coinbase Global Inc. of conducting an illegal exchange. โThe SECโs reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting the economic competitiveness of the United States and companies like Coinbase that have a demonstrated commitment to compliance,โ said the lead counsel for Coinbase.
Read More: SEC's Coinbase Lawsuit Heralds Deepening Cryptocurrency Crackdown in the US
Bitcoin accounts for almost half the value of the $1.1 trillion crypto market. Ether is the second largest digital asset, with an overall market share of approximately 20%.
Cryptocurrency prices declined after the news broke. Bitcoin is down about 2.6% since Sunday, to hover around $26,500 on Thursday in New York, Bloomberg data shows. Ether has also fallen, falling 3% during that stretch. It was meandering around $1,850 in afternoon trade.
--With the help of Muyao Shen.
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