US Crypto Exchange Activity and Liquidity Drop Following SEC Lawsuits

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(Kitco News) – The cryptocurrency market had a strong start to 2023, with the price of Bitcoin rising 90% to $31,165 on April 14. and Exchange Commission (SEC) and concerns about the health of broader financial markets.

Robinhood, the popular US brokerage service that also offers access to cryptocurrencies, released its May operating data report on Monday, which shows crypto trading volume on the platform fell by 43%. % in May compared to April.

This decline in total volume came despite the fact that both equity and options contract volume have increased since April, with gains of 27% and 29%, respectively.

Year-over-year, the difference was even more drastic, with the total volume traded in May 2023 amounting to $2.1 billion, compared to $6.6 billion in May 2022, which also turned out to be the same month that Terra/Luna collapsed and triggered the first contagion event of the year.

Robinhood data also shows a drop in the number of monthly active users (MAUs). The platform registered a total of 10.6 million MAUs in May, compared to 11.5 million in April and 14.6 MAUs in May 2022.

Last week, the brokerage announced that it would end support for Cardano (ADA), Polygon (MATIC) and Solana (SOL) following their identification as securities in SEC lawsuits against Binance and Coinbase. These are three of the most popular altcoins and this move could lead to even lower crypto trading volume on Robinhood.

The drop in volume and active users of the popular fintech app highlights the dwindling engagement of the crypto asset class in recent months, as regulators in the US have stepped up efforts to police providers of digital asset services.

June also saw liquidity and activity on the Binance.US exchange plummet following the SEC accusing the platform of multiple securities violations.

According to a report by Kaiko, liquidity on Binance.US, which is measured by aggregate market depth for 17 tokens, fell 76% in the week following the SEC lawsuit, from $34 million to $7 million.

Change in market depth on Binance.US. Source: Kaiko

Due to the exodus of market makers, the stock market saw its US market share fall to 4.8% from 20% in April.

The two largest cryptocurrency exchanges in the world, Coinbase and Binance (global), have also seen a drop in market depth since the lawsuits. “Coinbase liquidity is down ~16% while Binance is down ~7% since early June,” Kaiko data shows. “Binance’s market depth initially held steady, even increasing immediately after the lawsuit, but over the weekend fell as altcoin markets sold off.”

“The sharp decline in liquidity suggests that market makers are nervous and want to avoid volatility-induced losses and the not insignificant possibility that their assets will get stuck in a trade meltdown at FTX,” Kaiko said. .

Despite Coinbase’s declining liquidity, the exchange’s share of the U.S. market rose from 46% to 64% over the past week, Kaiko noted, but was unable to highlight a specific reason for this increase.

Kaiko said that in the long term, the SEC’s enforcement actions will likely lead to the establishment of a regulatory framework for cryptocurrencies in the United States, which will ultimately benefit the asset class.

“This week marked an inflection point, with the SEC taking over two of the world’s biggest exchanges,” Kaiko said. “While resolution may take some time, regulatory clarity is on its way, one way or another.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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