Market Spotlight: Regulatory Pressure Mounts in the US

Join CCData as we explore the latest trends in the digital asset industry with our market-leading data insights. In this week’s Market Spotlight blog, we reflect on the events of the past four months, which have been marked by numerous rate hikes and macroeconomic turmoil. This blog was created using CCData’s award-winning research and data. You can learn more about our data solutions here . State of the Market All eyes are currently on the Federal Reserve, with market participants speculating on the impending interest rate and inflation data. Recent turbulence in the banking sector has led many to believe that the upcoming May rate increase could be the last, with many taking the stance that a moderate increase of 25 basis points could help mitigate rampant inflation, potentially steering the economy towards a healthier state. Key Upcoming Macroeconomic Events in May Looking at digital assets, Bitcoin outperformed many of its traditional finance rivals in April, despite declining from its monthly peak of $31,023 to the $27,000 mark. The S&P500 and Nasdaq saw a slight decline of 0.92% and 3.46%, while Bitcoin and Ethereum saw their price move by -0.59% and 2.43%, respectively. https://medium.com/media/2fefd32169f8030bfd2022d42836fabc/href Gold has been making headlines recently, attracting the interest of investors due to prevailing macroeconomic concerns, coinciding with a recent increase in central bank gold reserves. Despite this, Bitcoin and Ethereum have both outperformed gold so far in 2023, with the former sharing similar narratives to gold. https://medium.com/media/069bc9a9210e56a2a7bd0442c1fe67f0/href The resilience of digital assets can be attributed to several factors, including the recent events in traditional finance, such as banking collapses and concerns over inflation and interest rates, alongside significant developments in the digital asset market, such as the Shapella upgrade. What’s Next for US Exchanges? Regulatory scrutiny remains a significant concern for the future of digital assets, particularly in the US market. Several weeks ago, it was reported that Binance.US was struggling to find a banking partner in the US to enable its customers to make cash withdrawals and deposits, after Signature Bank, its former banking partner, collapsed. Other exchanges, such as OkCoin, have faced similar challenges and had to cease withdrawals last month. Regulation continues to be a pressing topic, with Bittrex announcing the suspension of its US operations as a result of the uncertain regulatory environment in the country. Other US exchanges, such as Coinbase, continue to battle against the SEC, with the exchange filing a narrow action in federal court calling for a clear response to their petition requesting formal rulemaking guidance for the crypto industry. The extended regulatory scrutiny has raised numerous concerns among market participants, causing significant disruption in the US exchange landscape. As a result, some exchanges have expedited their expansion plans, with Coinbase revealing its intention to expand to Abu Dhabi, Brazil, and Canada, and Gemini expanding in the Asia Pacific (APAC) region. Gemini has appointed its CTO as the APAC CEO and is considering expanding its team in Singapore and India. The ongoing turmoil has impacted the market share of US-based exchanges, with most noting a decline in 2023 compared to their performance in 2022. For instance, the average market share of Gemini has dropped from 0.23% in 2022 to just 0.10% in 2023 (as of April 26th). Similarly, Okcoin’s market share has also shrunk from 0.1% to a mere 0.02% over the same period. https://medium.com/media/2e0f87499beb1916bf431477e8d0fa20/href Despite facing banking partner issues, Binance.US has increased its market share from an average of 0.83% to 1.65% as of the end of April. Similarly, Kraken managed to increase its market share from 1.75% in 2022 to 2.34% in 2023. When making the same comparison, Coinbase saw its market share stabilise, compensating for regulatory issues with a promise of on-chain presence and future expansions. While increasing regulatory scrutiny has notably affected trading volumes, it hasn’t significantly impacted the market share of larger exchanges. Instead, it seems to have a more pronounced influence on smaller US exchanges, with larger players like Binance US, Kraken, and Coinbase largely maintaining their positions despite the turmoil. Interestingly, a similar decline in market share has been observed in Europe and Asia. Binance, despite experiencing a drop in its market share from 55.4% in January 2023 to 46.4% by April 2023 (up until the 26th), has remained the primary exchange benefiting from previous market dynamics. Adding to macroeconomic and regulatory pressures, liquidity has also become a concern for market participants, with liquidity levels declining. https://medium.com/media/c863176e3456241549ac62b2601febb9/href Asset Focus: New Winners Recent regulatory turmoil has had a notable impact on asset activity, as evidenced by the slight decrease in derivatives and spot volumes (as of the latest figures available in April). https://medium.com/media/c366ece0cdac052c259233cf9a77b825/href The ongoing regulatory uncertainty has created a sense of unease among investors, leading to a reduction in trading activity. While the overall market sentiment remains cautious and neutral, activity and open interest are still significantly higher compared to 2023 averages, pushing an optimistic narrative for digital assets. https://medium.com/media/395bb9d7b86833c181fa016f7e111d8c/href According to CCData price data (Up to the 25th of April), certain digital assets have been performing exceptionally well in the market, including exchange tokens such as Binance’s BNB (which is up by 4.76%), OKX’s OKB (9.25% increase), RNDR (30.7% increase); a distributed GPU rendering protocol on the blockchain, and CSPR (20.8% increase); a layer 1 blockchain designed for building smart contracts. https://medium.com/media/eb961bd147786f2140b8e982d621389c/href In case you missed it, CryptoCompare is proud to announce the expansion of its data, index and research solutions under a new brand, CCData! You can now find all of our blogs, charts and research reports at CCData.io ! Want to access the data used in this blog? Our data solutions provide crucial real-time information necessary for tracking market movements, complete with tick-level trade history across all covered instruments and markets, at the highest granularity provided by each exchange. Learn more about CCData’s market-leading digital asset data below. CCData | Leading Digital Asset Data & Index Provider Market Spotlight: Regulatory Pressure Mounts in the US was originally published in CCData on Medium, where people are continuing the conversation by highlighting and responding to this story.