Novaque Research
From Collateral to Speculation Binance’s Role in the Altcoin Cycle
The dominance chart displays how market share changed over the year. Early on, BTC maintained solid control over trade volume, reflecting its status as a secure, liquid base asset. However, by mid-year, altcoins had begun to take control. Each increase in altcoin domination coincided with periods of BTC stability, indicating that traders felt secure enough to pursue higher-beta trades after Bitcoin stabilised. ETH frequently served as a bridge, with increased ETH volume signalling a greater risk appetite before money flowed into lower capitalisation. The futures chart provides colour. BTC futures continue to dominate in size, but when volatility hit, ETH and altcoin contracts increased disproportionately. Traders were not only keeping an eye on Bitcoin; they were also taking advantage of altcoins to generate substantial gains. Binance's wide range of pairings makes it the ideal site for this cycle. Finally, netflows confirm user behaviour. Outflows of BTC from Binance dominated much of the year, with long-term conviction holders withdrawing coins from the exchange. However, during volatility surges, there were strong inflows of BTC, most likely deposits for margin or to pivot into altcoin holdings. The assumption is that, Binance customers sent BTC in when they wanted to trade but withdrew it when they wanted to hold, leaving altcoin liquidity behind. A closing thought, on Binance, Bitcoin serves as the base, while altcoins power the cycle. Traders utilise BTC as collateral and a confidence indicator, whereas altcoins become the primary source of speculation when market circumstances improve.