Crypto Spot Trading Falls 40% After Banking Crisis

Spot trading on centralized cryptocurrency platforms fell 40% in April following the March banking crisis.

That’s according to a recent report by CCData, which tracks the cryptocurrency industry. It found that combined spot and derivatives trading volume on centralized exchanges fell 27.9% to $2.77 trillion in April, the first month-over-month drop in trading volume this year.

The spot trading volume, which dipped 40.2% to $621 billion, was the lowest volume seen since December 2022 and the second-lowest spot trading volume since July 2020.

“The uncertainty surrounding macroeconomic conditions, including looming recession threats and a possible pause on Fed rate hikes amidst the turmoil in the banking sector, has contributed to the declining volumes this month,” the report said.

Last month, the CEO of Circle said America’s shaky financial market had helped drive down the value of his company’s USD Coin.

“We are seeing a huge amount of concern globally about the U.S. banking system,” Jeremy Allaire told Bloomberg Television. “We are seeing concern about the regulatory environment in the U.S.”

Circle’s USD Coin stablecoin temporarily lost its dollar peg amid March’s banking crisis due to concerns the company had funds at Silicon Valley Bank when it was closed down and taken over by the Federal Deposit Insurance Corp.

Meanwhile, the CCData report showed spot trading volume on Binance dropping 48.1% to $287 billion in April, its second-lowest monthly trading volume since 2021.

The platform’s market share also continued to slide, falling for the second consecutive month to 46.3%, its lowest market share since before the downfall of FTX, which drove a “consolidation of trading activity to Binance,” the report said.

However, “Binance’s position as the dominant exchange in the industry is still a long way from being threatened with Coinbase and OKX, the next largest exchanges, accounting for only 5.60% and 5.39% of the total spot trading market.”

The report comes as the cryptocurrency sector is facing increased scrutiny. The latest example of this trend came this weekend, when Binance announced it was shutting down operations in Canada due to that country’s new requirements for crypto firms.

Also this month, PYMNTS reported that the Securities and Exchange Commission (SEC) had handed out 13 enforcement actions in the first months of 2023, on pace for an increase of more than 25% from last year’s actions, which were themselves 50% higher than 2021.

“The SEC’s 43 actions in the past 16 months represent more than 30% of the agency’s entire history of 140 crypto-related enforcements, going back to the SEC’s first-ever crypto enforcement action in July 2013,” PYMNTS wrote.