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Spot trading slumps in Q2: Is there a silver lining ahead?

3min Read

The second quarter of 2023 saw a decline in spot trading due to regulatory hurdles, impacting the cryptocurrency market cap. Yet, potential new frontiers emerge amid uncertain US regulations.

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  • Spot trading fell to its lowest level since 2020.
  • Crypto market cap maintained the $1 trillion mark as daily volume hits $37 billion.

The final days of the second quarter witnessed a notable decline in spot trading volume on major exchanges such as Binance, Coinbase, Kraken, and Bittrex. The primary reason behind this decline can be attributed to the regulatory hurdles that these exchanges encountered. The big question arises: How has this impacted cryptocurrency market capitalization?

Spot trading declines in Q2

A recent comprehensive report by Kaiko has shed light on a significant decline in spot trading in the second quarter of this year. The report highlighted the pivotal role the Securities and Exchange Commission (SEC) played in this decline across various exchanges.

The regulatory scrutiny commenced with Bittrex, which faced allegations of trading unregistered securities. As depicted in the report’s chart, this led to a substantial decrease in spot trading on the platform.

Source: Kaiko

Following Bittrex, the SEC turned its attention to Binance US, Binance, and Coinbase, accusing them of offering unregistered securities. These allegations further contributed to the overall decline in spot trading activity. According to Kaiko, spot trading volumes reached their lowest point since 2020.

Notably, Binance experienced a staggering decline of almost 70%, while Coinbase, Kraken, OKX, and Huobi saw spot volumes plummet by over 50% in Q2.

In addition to the decline in spot trading, the SEC’s crackdown on these exchanges had another adverse impact—it resulted in a loss of liquidity for the top 10 tokens. Bittrex, for instance, witnessed a significant drop of approximately 68%, while Binance US and OKCoin suffered an 85% decrease in liquidity.

State of the crypto market

In light of the noticeable decline in spot trading, it is worth examining the impact on the cryptocurrency market cap, as observed on Coin Market Cap. Analyzing the market cap chart revealed a fluctuation pattern between highs and lows since the beginning of the year. However, the second quarter showcased greater volatility, followed by a significant upward trend toward its conclusion. 

Crypto market cap

Source: CoinMarketCap

As of this writing, the cryptocurrency market cap had surpassed $1.2 trillion. It was accompanied by a 24-hour trading volume exceeding $37.8 billion.

It is noteworthy that despite the ongoing SEC investigation, other activities, such as filing a Bitcoin exchange-traded fund (ETF), have contributed to optimistic market sentiment, positively impacting both Bitcoin’s value and the overall crypto market cap.

New spot trading frontiers?

As we move into the third quarter, it remains to be determined what the future has in store for the crypto market. However, there is potential for an uptick in trading activities once the regulatory challenges are resolved. Notably, one intriguing finding from the report was the surge in trading volumes on South Korean exchanges during the last week of June. The volumes reached an impressive peak of over $4 billion per day. 

This surge suggested that a new frontier could emerge if the United States regulatory environment remains ambiguous.  Market participants might seek alternative avenues to engage in crypto trading if regulatory clarity is lacking in the US.

 

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Adewale is a full-time journalist at AMBCrypto. While he is increasingly fascinating by the world of blockchain and cryptocurrencies, Adewale holds a degree in International Relations. Besides working on insightful articles that touch upon the crypto-space's hottest issues, he finds joy in supporting Manchester United and Afrobeat music.
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