Only $20B of Stablecoins Left on Exchanges as Capital Dries Up

• Nearly $24 billion of stablecoins have left exchanges since FTX collapsed last November.
• Liquidity continues to fall in the crypto space, with capital moving elsewhere despite rising prices.
• Strict regulatory climate in the US, high yields in trad-fi and uncertainty may be contributing to the pattern.

Stablecoins Departing Exchanges

Since FTX’s collapse in November of last year, nearly $24 billion worth of stablecoins have departed crypto exchanges. This has caused a decrease in total marketcap of stablecoins by $16 billion. The lack of liquidity points to a larger issue within the cryptocurrency space where capital is moving away from crypto despite rising prices.

Regulatory Climate and Uncertainty

The regulatory climate within the US has only tightened over time which could contribute to the decreased liquidity as companies like Jane Street and Jump Crypto are scaling back their operations due to this strict environment. Additionally, high yields from trad-fi and other sources could also be causing investors to be less likely to put money into crypto markets. Lastly, there is still an overall sense of uncertainty surrounding cryptocurrencies that appears to be impacting investor decisions on whether or not they’re willing to enter these markets.

Amplified Price Movements

Due to low liquidity levels, prices have been able to move up more rapidly with less capital needed for order books on exchanges. This can be seen as a positive for those that are invested already as inflation has gone down while Bitcoin has risen over 60% this year alone; however, it does point towards a potentially dangerous future if liquidity remains so low since amplified price movements can lead both upwards and downwards very quickly should anything unexpected happen within the market or industry at large.

SEC’s Warpath

The SEC has been adamant about its stance on cryptocurrency firms operating without proper regulations, claiming that it is “mass non-compliance” rather than lack of clarity that is causing these issues among operators in the space. It appears that money is speaking louder than words here as many companies are closing shop or scaling back operations due to stricter regulations set forth by government bodies like the SEC.

Conclusion

Crypto markets have experienced thin liquidity since Alameda’s insolvency last year which has been further compounded by recent events such as two major market makers reducing their presence in US markets due stringent regulatory measures imposed by governing bodies such as the SEC coupled with higher yields available elsewhere. Despite an increase in prices over 2021 thus far, there still needs to be a concerted effort made by all stakeholders involved in order for crypto markets to become viable options for investors again with deeper liquidity levels being necessary for sustainable long-term growth prospects within this sector