Bybit’s push for dominance

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Bybit’s push for dominance.

The launch of spot Bitcoin ETFs in the US has significantly boosted global crypto trading volumes. However, not all exchanges have benefited equally from the rally that started in October.

One exchange has by far made the most gains: Bybit. Since October, the exchange’s market share has surged from 8% to 16%, surpassing Coinbase in March to become the second-largest exchange after Binance.

Despite reporting improved revenue and profits, Coinbase’s global market share has seen only a minor increase of 1% over the same time period.

Even more surprisingly, despite Binance’s deal with US regulators in late 2023, potentially lessening its regulatory risks, the exchange’s dominance has continued to erode, dropping from 60% to 54% since October. Upbit and smaller offshore markets have also witnessed a decline.

So what’s driving Bybit’s volumes? One explanation could be its competitive fees, which are among the lowest in the industry.

However, other offshore exchanges like Binance and OKX also offer low fees, and many exchanges have ongoing zero-fee promotions and reward campaigns. Bybit launched zero fees for USDC trading in February 2023, while Binance has promoted TUSD and FDUSD over the past year. This suggests that while low fees contribute to Bybit’s competitive edge, they are not the only reason for its rise.

Analyzing spot trade volumes by asset reveals that the increase in volume on Bybit has been driven by both BTC and ETH, whose market share has risen from 17% to 53% since last year.

In contrast, Binance has seen a stronger increase in altcoin volume, while the share of BTC and ETH originated volume has declined to 43% this year from 59% a year ago. Altcoin volume is typically more impacted by swings in risk sentiment and tends to decline more during bear markets.

Bybit’s growing spot market share has also been supported by its rapidly growing derivatives offering. In 2023, Bybit cemented its place as the second-largest derivative market after Binance.

While its market share of open interest has remained flat since October, Bybit saw significant growth in the first half of 2023. This could indicate that the exchange benefited from Binance’s regulatory troubles. In contrast, OKX has seen its market share decline to 15% from 25% in early 2023.