Could Arkham’s derivatives exchange really challenge Binance?

Arkham is working on securing a free-trade zone (FTZ) license in the Dominican Republic. The permit will allow it to benefit from various tax exemptions and fiscal incentives offered under the country’s FTZ regulations.

It is no minor undertaking; many other exchanges, some of which are still around today, are still trying to do that with little luck. So what makes the new platform Arkham plans to build so different that they believe it can threaten Binance’s hold on the market? 

What we know about Arkham’s crypto derivative platform 

Arkham Intelligence is preparing to launch its own cryptocurrency derivatives exchange, which will go live in November 2024. The proposed exchange will target retail investors, and over time, Arkham aims to compete with major players like Binance. 

Arkham already has the backing of notable investors like OpenAI founder Sam Altman, and it plans to base its operations in Punta Cana, the Dominican Republic, an area known for favorable tax regulations. 

Unfortunately, thanks to U.S. regulatory constraints, the new platform will not be accessible to U.S. users. It is willingly relinquishing a large chunk of potential cash flow from a market known to be incredibly liquid. 

However, reports have it the exchange has been in development over the past year and is actively raising $100 million to scale its operations. So, it probably has a plan in place if it won’t even attempt to take a share of the United States market. There’s certainly some merit to looking outside the U.S. for its user base.   

We also know the initiative will occur after the company relocates from its current London and New York bases.

What will Arkham’s exchange do differently?

Arkham Intelligence’s ultimate goal in creating the new exchange is to challenge the major players in the token exchange market, which begs the question: How will it stand out? 

Many derivative exchanges are doing okay, but few are near Binance’s standards. 

If Arkham plans to break out and do something that exchanges like OKX and Bybit have failed to do so far, it will need to do more than provide a unique experience specially catered for retail investors. 

To be fair, Arkham already has a few things going for it. 

• Tax and regulatory benefits: As earlier stated, Arkham will be operating from the Dominican Republic, which means the exchange will benefit from favorable tax laws and free-trade zone (FTZ) advantages. This may allow it to offer more competitive pricing and incentives for users outside the U.S. 

• Advanced derivatives products: Arkham’s new exchange aims to expose investors to a wide range of crypto derivatives, similar to futures and options on platforms like Binance. This includes contracts tied to popular assets, with potential offerings in smaller denominations, similar to products like Bitcoin nano-futures on other exchanges.

• High-volume trading capacity: Arkham has had over a year to work on its exchange, so you would expect it to introduce something new to allow it to handle significant volumes. This will be crucial to gaining a competitive advantage in a booming crypto derivatives market that accounts for 71% of total crypto trading in September 2024.

• Brand image and marketing: Arkham’s new exchange will enjoy the company’s brand reputation, which it has been actively building as a sentry of transparency within the crypto space. Outside the space, it has been busy as well. The €1.8 million sponsorship deal with the Turkish football club, Galatasaray immediately comes to mind. Partnerships like that are expected to enhance its visibility, making it an even more attractive option for users. 

• Investor support and growth plans: Arkham enjoys the backing of notable figures like Sam Altman and companies like Binance Labs, and so will its new exchange. There are talks about Arkham raising $100 million from Middle Eastern investors to expand its operations further. With such support, Arkham would need ineptitude at levels similar to FTX to even remotely be at risk of capsizing. 

• Blockchain analytics perks: Arkham is already famous for its blockchain data analytics platform, which monitors and analyzes blockchain transactions. Its background in data analysis could enhance the new exchange’s security, transparency, and user insights, allowing it to stand out from other platforms that lack such capabilities. 

These features, combined with Arkham’s existing data analytics platform and growing user base of more than 800,000 active monthly users, may just be enough to make the upcoming Arkham exchange a formidable upstart in the competitive crypto derivatives space. 

Whether it will be enough to threaten Binance’s supremacy is another question—one that its investors hope is answered in the affirmative. 

How does the proposed exchange compare to Binance?

Binance is at the top of the game for good reasons. The exchange has most of the answers regarding trading options for users, including futures, options, perpetual contracts, and leveraged tokens. 

While still in development, Arkham’s exchange is expected to offer similar features, but it hasn’t revealed the full extent of its services just yet. 

Of course, speculation abounds, and everyone expects Arkham to leverage its resources as a data-tracking giant. Besides that and other standard crypto derivative exchange features, no one is sure if Arkham has a surprise use case that will put them in the league of Binance and other exchange giants.

Nevertheless, among the established features Binance currently offers, there are some Arkham can tweak to provide better options for users. For example, Binance offers traders up to 125x leverage on some futures contracts, a value only a few exchanges like OKX and Huobi have been able to offer. 

FTX, before its downfall, offered as much as 101x leverage, but that value fell to 50x after the scandal involving Sam Bankman-Fried. The leverage Arkham will offer has not been disclosed, but it is one way the new exchange can lodge itself firmly in the league of giants. 

The world is now waiting to learn more about Arkham’s new exchange, but one area where it will most likely beat Binance is access, pricing, and fees. 

Binance operates globally, albeit with ever-increasing regional restrictions. Arkham’s exchange will focus on non-U.S. markets, and it should look to take advantage of pricing, thanks to its location in the Dominican Republic.

Arkham could not have chosen a better time 

While Binance remains the undisputed number one in crypto derivatives trading, its dominance is at its lowest in four years, with rivals like Bybit and OKX gaining ground. 

The decline in Binance’s dominance in the crypto derivatives market can be attributed to a cocktail of regulatory pressures, competitive growth from rival exchanges, and internal restructuring.

In response to these regulatory challenges, Binance has had to voluntarily withdraw or limit its operations in several key markets, including Europe, Nigeria, and the U.K., where local regulators have banned or imposed heavy restrictions on Binance’s derivatives services. 

These concessions have allowed the competition to gain ground. Arkham’s new exchange aims to capture a significant share of the derivatives market, and it may just be the new player needed to reshuffle the deck—one that might ultimately give Binance a run for its money.