Notes 6/23: Binance’s Zero Fee Gamble and Voyager Digital’s Crash

Binance Introduces Zero Trading Fees In Crypto

It took decades for trading firms to offer zero commission trades. It took less than three years for to offer the same feature. The trading platform announced yesterday that it has cut trading fees for many of its bitcoin pairs down to zero. According to the company’s blogpost, four market pairs will become free to trade: BTC/USD (Bitcoin/US dollar), BTC/USDT (Bitcoin/Tether), BTC/USDC, and BTC/BUSD.

There is, of course, no such thing as a free lunch in life. Trading firms like Robinhood are able to offer zero commission trades because they sell bulk order flows to market makers like Citadel. It is not clear how intends to offset revenues from trading fees.

For some companies like Coinbase, fees can amount to a significant source of income. In its last quarter, the exchange said transaction fees accounted to as much as 80% of its overall revenue. Binance.US correlated the low fee announcement to its $200 million seed round earlier this year in its post.

But the company’s expenses may multiply in the coming year, what with stablecoin regulation on the cards. It will have to develop other parts of its business to ensure a sustainable source of revenue.

The post announcing zero trading fees also plugs’s staking platform Currently, the company offers staking for seven cryptocurrencies. The list does not include popular cryptocurrencies like Bitcoin or Ethereum’s ether. The highest annual percentage yield offered on the exchange is 16% for Audius, the native cryptocurrency of a streaming platform.      

Also, users will still have to pony up transaction fees. All transactions involving bitcoin are committed to its blockchain. The action involves costs. The cryptocurrency’s transaction fees have been on a roller coaster ride since 2017. There is congestion on bitcoin’s network, and transaction fees skyrocket, when transaction numbers surge.

Voyager Takes a Hit

If crypto is, indeed, a house of cards, then it is tumbling fast.

Crypto broker Voyager Digital has reduced its daily withdrawal limit to $10,000 from $25,000 because of its exposure to Three Arrows Capital or 3AC, as it is known in crypto circles.

Voyager’s shares fell by 60% after it disclosed an exposure of around $666 million (based on prices at that time) in the form of 15,250 bitcoin and $350 million worth of USDC to 3AC. The company has taken a loan of $200 million in cash and USD coin and 15,000 bitcoin from Alameda Research to “safeguard customer assets in light of customer volatility.”

Three Arrows Capital has hired legal and financial advisers to “explore asset sales and rescue by another firm,” states the Wall Street Journal. Celsius, meanwhile, has gone silent after generating a hectic news cycle last week.

The roster of firms coming out with disclosures about losses due to exposure to a failing market is interesting because it means that crypto’s roots are shaky and not really built on a strong foundation. Every so often, its ecosystem erupts with conversations about the entry of institutional investors and liquidity. In actual fact, crypto companies are skating on thin ice that might give way any moment, when there is a downturn.

Of course, all of this is conjecture since crypto is largely opaque. Not much information is available about transactions are available publicly. Explanations and posts about most so-called crises in crypto are based on inputs from insiders and company statements.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.