Why did Binance ditch Ordinals — and will the market survive?

Data shows that Binance’s NFT market isn’t a very popular place for Ordinals anyway; investors are now focused on Runes instead.

Binance’s decision to remove support for Ordinals in April raised eyebrows among Bitcoin enthusiasts.

The embattled exchange, which has been waging a legal battle on multiple fronts in recent months, said the move was designed to “streamline” its product offering.

He went on to warn anyone with Bitcoin NFTs to move them elsewhere so they can continue to qualify for airdrops.

This marks a rather sudden U-turn by Binance, the largest crypto platform in terms of trading volume.

Ordinal numbers only became technologically possible early last year, allowing inscriptions to be made on a single satoshi; this is equivalent to 100 millionth of one Bitcoin.

As a result, images, videos, and other types of data can now be added to sats, but critics argue that this only serves to clog Bitcoin’s blockchain.

Just last May, Binance’s head of product Mayur Kamat said:

“Bitcoin is the OG of crypto. “We believe things are just getting started here and we can’t wait to see what the future brings in this field.”

Mayur Kamat

So why is there a dramatic reversal and will this be a crushing blow to the Ordinals’ future?

How do ordinals hold up?

Binance officially ended support for Ordinals on April 18; This means they can no longer be traded on the platform’s NFT market.

Data from CryptoSlam! Since then, Ordinals shows a marked decline in sales volumes as well as the number of unique buyers and sellers.

Ordinal numbers sales, unique buyers and sellers | Source: CryptoSlam!

Sales volumes totaled $28.2 million on April 19, with 9,469 unique buyers and 9,728 unique sellers.

Fast forward a week and to April 26, revenues had fallen to $11.4 million. Meanwhile, the number of buyers and sellers decreased by more than half, to 4,722 and 4,515 respectively.

However, it is important to emphasize that correlation does not mean causation and that other factors also play a role here.

First, April 19 officially marked the latest Bitcoin halving, where block rewards dropped from 6.25 BTC to 3,125 BTC. Merchants were busy with other things.

But second, the halving also led to the launch of Runes, a new standard that allows fungible tokens (like ERC-20 in Ethereum) to be distributed more efficiently in Bitcoin.

Data from Dune Analytics gives a strong picture of what happened in the second half of April:

Source: Dune Analytics

On April 19, Ordinals had a 6.5% transaction share on the Bitcoin blockchain.

A day later – when Runes made their debut – Ordinals represented only a 0.4% share, fueled by the frenzied demand for memecoins.

The hot pink in the chart above represents the rate of daily Runes transactions, which reached a staggering 73.5% share on launch day.

In other words, Binance is not solely responsible for the decline in demand for Ordinals; Runes steals their lunch money.

What’s next for the ordinals?

Ordinals collectors are unlikely to lose any sleep over Binance’s exit; especially considering that the exchange is banned or severely restricted in 20 countries around the world. They include Canada, China, Japan, Italy, Australia, UK and USA

Other Dune Analytics dashboards show that Binance’s NFT platform is not a very popular target for Ordinals anyway.

On April 29, the two marketplaces (OKX and Magic Eden) processed 94% of transactions between them.

Source: Dune Analytics

You could argue that this means Binance is putting its resources into areas where it can actually gain a larger market share.

Now the big question is: Will Binance offer Runes support anytime soon?

Binance is preparing to list Runes

They didn’t list BRC-20 until months after launch

But when they did that, it came out in the hundreds of millions of dollars in volume, and that’s $ORDI Reaching a $1 billion valuation pic.twitter.com/ut7hVx3B7t

— trevor.btc (@TO) April 22, 2024

As trading volumes for newly launched memecoins on the Bitcoin network continue to increase, it seems inevitable that Binance will want a slice of the pie.

With exchanges engaging in a brutal price war to remain competitive on trading fees, trading platforms are always looking for ways to diversify their revenue streams.

Demand for ordinals may have fallen in recent weeks, but Bitcoin remains the second-largest blockchain by NFT sales volume – a few blocks ahead of Solana, with Ethereum recently returning to the top spot.

If interest in Bitcoin NFTs recovers, Binance’s decision to stop offering Ordinals through its own marketplace may prove short-sighted.