The once vibrant and bustling market space of institutional crypto trading has experienced a significant setback in recent months. March marked the occurrence of several bank failures, triggering a series of repercussions that have reverberated across the industry. In this blog post, we delve into the insights provided by blockchain intelligence platform Chainalysis, shedding light on the decline of institutional cryptocurrency transactions and the subsequent exodus of stablecoins from North America.

A Dip in Institutional Crypto Activity:
Chainalysis’s latest report reveals a noteworthy decline in the volume of institutional cryptocurrency transactions valued at over $10 million. Starting from April 2023, North America experienced a sharp plunge in these transactions, whereas professional and retail trading volumes remained relatively stable. The banking crisis in March, resulting in the closure of major US banks, including the crypto-friendly institutions Silicon Valley Bank, Signature, and Silvergate, played a significant role in this decline. Combined with the failure of troubled digital currency exchanges and lending desks, such as FTX and Alameda Research, in November, it further compounded the situation.

The Exodus of Stablecoins from North America:
Another consequential aftermath of the banking crisis has been the diminishing dominance of stablecoins in the North American crypto market. Stablecoins, primarily USD-pegged tokens, accounted for approximately 90% of global activity. However, from February 2023 onwards, their prominence in North America began to erode steadily. In the span of a few months, the percentage of digital currency volume attributable to stablecoins declined from 70.3% to 48.8%.

Shift to Non-US Licensed Crypto Services:
Chainalysis’s research highlights a significant trend since the spring of 2023—a notable shift of stablecoin inflows from US-licensed crypto services to their non-US counterparts. This movement represents a broader migration pattern, as businesses and traders seek financial alternatives beyond US jurisdictions. In fact, the report reveals that the majority of stablecoin inflows to the top 50 crypto services have shifted towards non-US licensed platforms. As of June, these platforms received 54.6% of stablecoin inflows among the top 50 services, reversing the direction seen in late 2022 and early 2023.

Conclusion:
The aftermath of the banking crisis in March has left a lasting impact on institutional crypto trading. The decline in institutional cryptocurrency transactions, particularly in North America, coupled with the exodus of stablecoins, reflects the challenges faced by the industry. Businesses and traders are seeking stability and regulatory certainty, prompting a shift towards non-US licensed platforms. As the market continues to evolve, it will be essential for participants to adapt and navigate these changing dynamics.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The NFT and cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.