Bitfinex, until recently one of the largest cryptocurrency exchanges in the world, has seen a decline in market-share as regulatory woes compound and other exchanges price it out.
Since early May, the Hong Kong-based exchange’s market share has dropped from 30 percent to under 20 percent, while the market-share of Bitstamp, a competitor, has commensurately risen, according to a new report from crypto analytics firm Coin Metrics.
Coin Metrics points to two possible reasons for the downtick. The first is the ongoing investigation into Bitfinex by the New York attorney general, which earlier this year accused the exchange—along with its parent company, iFinex—of covering up an $850 million deficit in its fInances, without notifying investors. That money was supposedly held hostage by Crypto Capital Corp, a since indicted, Panama-based payment processor.
The second possibility is that Bitfinex has been priced out by Bitstamp, which offers similar services but lower fees. That exchange introduced a new fee model in late August, around the time Bitfinex’s market-share began to decline. Coin Metrics observes that this new fee model might have poached many of Bitfinex’s high-voltage, “whale” customers.
Trades of over $1 million on Bitstamp, for instance, incur fees of 0.14 percent, while the same amount on Bitfinex incurs fees of 0.20 percent for the “taker,” according to Coin Metrics.
The study also dismisses the notion that Bitfinex lost traction because of the Hong Kong protests. Data shows that Bitifinex’s market-share actually increased as the Hong Kong protests began, only beginning its descent when Bitstamp rolled out its new fee model. The regulatory travails, meanwhile, may have put off U.S. traders from using the platform—though it was already technically illegal, reporting by The Block suggested it was trivially easy for New Yorkers to trade.
Bitfinex’s LEO token has reportedly also seen a decline, with under 2,000 unique addresses holding the cryptocurrency. Bitfinex launched the LEO token sale to recapitalize its business after the New York attorney general made public the exchange’s financial troubles.