KuCoin, a cryptocurrency exchange, has experienced a significant decline in market share, falling from approximately 6.5% to less than 3% due to a massive outflow of funds. Customers have been transferring their funds to other centralized exchanges like Binance, Coinbase, Gate.io, OKX, and MEXC, which they perceive as safer options. Market makers leaving the exchange account for some of these outflows, while other customers are transferring funds directly to their own self-custodial wallets. The exchange saw a daily trading volume drop from $2 billion to $520 million, resulting in a dip in its market share.
Data from Kaiko and Nansen revealed that KuCoin experienced outflows of over $600 million on March 26, mainly in USDT and ETH, which exceeded inflow by a large margin. On March 27, the exchange recorded over $1 billion in outflows within 24 hours. This trend continued with KuCoin’s market share suffering a decline following lawsuits from the US Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) on March 26 for violations of anti-money laundering laws and operating an illegal digital asset derivative exchange. The DOJ accused KuCoin and its founders of money laundering, revealing that the platform served a substantial American user base despite the exchange’s claims that it had no US customers.
Despite the allegations and the panic among customers, KuCoin maintained that its platform was secure and operational, denying any wrongdoing in official statements. To address the congestion experienced during withdrawals, KuCoin announced a $10 million airdrop program for affected customers and planned future aid for users who couldn’t withdraw their assets. However, these measures were not enough to stem the massive outflows of funds from the exchange, leading to a significant decline in its market share by over 50%. The charges against KuCoin by the DOJ and CFTC further alleged that the exchange knowingly ignored US know-your-customer (KYC) and AML regulations, processing over $3 million from the sanctioned crypto mixer, Tornado Cash, between August 2022 and November 2023 alone.
The outflows from KuCoin wallets included transactions on Ethereum and EVM chains, with data from Nansen showing a drop of over 15% in assets held by the exchange. This on-chain data only accounted for transactions between the platform and other exchanges or wallets, not transactions between KuCoin addresses. The increased withdrawals from KuCoin customers and the ongoing panic within the market have resulted in a significant decline in the exchange’s market share and trading volume, as users flock to other exchanges they perceive as safer. The exchange’s reputation and business have taken a hit, with efforts to reassure customers and address the issues through airdrops and assistance programs proving insufficient to stop the mass exodus of funds.
