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Traders turn to stablecoins as regulatory pressure in the US ramps up

June 6, 2023
in Crypto Exchanges
Reading Time: 3 mins read
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A wave of regulatory stress rippling via the U.S. crypto market has pushed merchants away from Bitcoin (BTC) and Ethereum (ETH) and in the direction of the seeming security of stablecoins.

This shift aligns with the emergence of a burgeoning political motion within the U.S. aiming to impose stringent controls on the crypto and mining sectors. Proponents of the brand new regulation argue that the disruptive nature of cryptocurrencies calls for a tighter regulatory grip to make sure stability and safety within the monetary ecosystem.

Then again, critics categorical issues that heavy-handed regulation might stifle innovation and drive the trade offshore. This polarizing debate has created an environment of uncertainty that’s reshaping buying and selling behaviors.

These regulatory pressures appear to be nudging merchants towards the soundness of stablecoins. That is distinctly noticed within the conduct of Tether’s USDT, whose provide reached an all-time excessive of $83.2 billion on June third. Round $17 billion of this determine has been added to Tether’s market cap in 2023 alone.

usdt tether market cap ath
Graph displaying Tether’s market cap from January 2021 to June 2023 (Supply: Glassnode)

Nonetheless, regardless of Tether’s rising market capitalization, its buying and selling quantity is experiencing a downward development. Knowledge from Kaiko confirmed that on each CEXs and DEXs, each day USDT quantity averaged round $7 billion in Could, reaching multi-year lows. This seeming contradiction signifies that whereas the general provide is rising, energetic buying and selling of the asset is lowering.

usdt tether trading volume
Graph displaying Tether’s buying and selling quantity on centralized and decentralized exchanges from Could 2020 to Could 2023 (Supply: Kaiko)

Conversely, different vital gamers within the stablecoin market, USDC, and BUSD, witnessed their provide drop to multi-year lows.

stablecoins aggregate supplies
Graph displaying the combination provide of stablecoins from June 2020 to June 2023 (Supply: Glassnode)

Analyzing change inflows reveals an thrilling development. Since April, demand for stablecoins on exchanges has weakened, with BTC and ETH inflows compensating for this. Regardless of the sustained influx, the 2 cryptocurrencies have been primarily buying and selling sideways or experiencing hostile worth motion, indicating that the majority inflows are seemingly sell-side.

major assets sell side inflows
Graph displaying the buy-side and sell-side inflows for Bitcoin and Ethereum in 2023 (Supply: Glassnode)

Stablecoins, being non-interest bearing and exempt from capital positive factors taxes, supply a sure attract to merchants. Their nature doesn’t generate the taxable occasions integral to buying and selling BTC or ETH, which is especially engaging to U.S. merchants beginning to really feel the squeeze of elevated regulatory scrutiny and potential enforcement actions.

The put up Merchants flip to stablecoins as regulatory stress within the US ramps up appeared first on CryptoSlate.

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