The rivalry between Binance and Coinbase has escalated with the announcement that Binance is accepting credit card payments — the latest encroachment of the giant crypto exchanges on each other’s turf.
This surprise move, made possible through a partnership with payment processing platform Simplex, is the latest in a journey that has seen Binance become the largest crypto exchange by volume. But with card payments, the exchange has entered a new category — in direct competition with Coinbase, Bitstamp, and other fiat-to-crypto exchanges.
The rise of binance
On the journey to the top, Binance has knocked several smaller exchanges to the wayside — taking market share from Bittrex, Poloniex, and other similar altcoin-focused platforms that couldn’t match its security standards, user-interface, and range of cryptocurrencies offered.
But until now, a lack of fiat-crypto trading has held the exchange back. During the 2017 bull run, for example, the likes of Coinbase and Gemini remained the preferred fiat gateway for those buying bitcoin in US dollars. However, neither Coinbase nor Gemini provided a wide range of altcoins, so many of those bitcoins would end up being traded on Binance — for more diverse altcoin pairs.
With fiat-to-crypto payments, Binance effectively removes those USD on-ramp platforms from the loop, allowing users to complete the entire buying process on one platform. This functionality looks set to help the exchange continue pulling volume away from other exchanges — a process that has been ongoing since August 2017.
*Total volume for Binance, Bitstamp, Kraken, Bitfinex, Coinbase Pro and UPbit since August 2017 shows Binance’s rapid rise to dominance. *
Of the six biggest exchanges by traded volume, which are considered trusted by the Blockchain Transparency Institute, Binance’s trading volume accounts for over 50 percent of the total volume traded — a rise from less than 10 percent in August 2017.
As seen on the chart, Binance’s biggest competitor is Bitfinex, which accounts for around 15 percent today, well down from its 40 percent share in August 2017.
In the “alt season” of January 2018, when bitcoin began to sink and traders rushed to buy altcoins, Binance’s share of trading volume surged, but then sank again in February as bitcoin made a brief comeback. Since then, the exchange has been steadily growing, and has continued to increase its dominance.
Trader’s choice — Binance or Coinbase?
As the data suggests, Binance has built its reputation on the back of altcoins, and much of its popularity stems from the broad range of alternative cryptocurrencies that can be traded on the exchange. With fiat capabilities, Binance is now competing in a different marketplace.
Interestingly, despite having similar offerings, there are some significant differences in the fee structures of Binance, Coinbase and Bitstamp when it comes to credit card payments and bank transfers.
Those wanting to buy bitcoin, ethereum, litecoin or XRP with fiat on Binance, will need to use a debit or credit card — and will pay a transaction fee of 3.5 percent or $10 (USD); whichever is higher. This means someone buying $500 of bitcoin would pay $17.5 in fees, and someone buying $200 of bitcoin would pay $10 in fees.
The same transactions made with a credit card on Coinbase would incur slightly higher charges. At 3.99 percent, Coinbase’s card fees are almost 0.5 percent higher than Binance, and at 5 percent, Bitstamp’s fees are a whole 1.5 percent higher.
Both Coinbase and Bitstamp, however, are able to offer purchases via bank transfer, which work out far cheaper: a $200 bank transfer purchase on Coinbase would cost $2.99, compared to a $200 credit card purchase on Binance which would cost $10.00. Binance does not currently offer purchase via bank accounts.
Nevertheless, a few dollars in savings might seem insignificant to those rushing to buy crypto when the market turns — at least, less significant than the potential effect on price that three to five days of waiting for a bank transfer to process could have.
Enabling card payments is a significant step forward for Binance, and is just one of several recent developments, including Binance Jersey, Binance DEX, and the acquisition of TrustWallet, that have helped push the exchange’s native token — BNB — into the top ten cryptocurrencies by market cap.