The US regulators have been cracking down on the crypto space for a while. As a result, it becoming harder for companies to access USD to buy digital assets.
The total number of payment providers is shrinking in the United States and also stablecoins, which have been the foundation of crypto, have seen their dominance waning since the collapse of the crypto exchange FTX.
Considering the trading volume of the world’s largest cryptocurrency, the Dollar-denominated BTC has continued to drop. On the other hand, Euro and Tether-denominated Bitcoin pairs have been gaining traction since November 2022.
Clara Medalie, director of research at Kaiko, said that the decline in USD after FTX’s collapse could be majorly linked to a drop in institutional trading activities. She added that institutional trading desks usually prefer settling their trades in dollars instead of stablecoins.
In the past, traditional banking platforms have played a key role as a reliable on-and-off ramp between crypto platforms and hard currencies. But amid the FTX collapse, US banks have been cutting down their association with crypto firms.
Amid the recent downfall of crypto-focused bank Silvergate Capital, stablecoins are once again gaining traction among traders. In its report, Kaiko stated that the number of fiat trading pairs listed by exchanges has dropped since the rise of stablecoins. Last year in 2022, the total number of dollar-denominated trading pairs across all crypto exchanges dropped to 326 from 400 a year ago. On the other hand, the euro-denominated trading pairs jumped from 96 to 125.
After last week’s correction, the broader crypto market has entered consolidation. But on-chain data from CryptoQuant shows that the funding rates have been on a decline and the overall sentiment has remained largely bearish.