Capital Drains From Crypto Space: Stablecoins Left on Exchanges Drop to $20B

• Nearly $24 billion of stablecoins have left exchanges since FTX collapsed last November, causing the total marketcap of stablecoins to dip by $16 billion.
• Rising crypto prices have been able to move up more rapidly due to low liquidity, but this could be a double-edged sword for markets.
• The US regulatory climate is seen as a contributing factor to the draining of capital from the crypto space.

Capital Draining from Crypto Space

Since FTX’s collapse last November, nearly $24 billion worth of stablecoins have left exchanges and the marketcap of stablecoins has dipped by $16 billion. Despite rising prices in the cryptocurrency space, liquidity continues to fall as capital flows elsewhere.

Rising Prices with Low Liquidity

The low liquidity has enabled prices to rise more quickly and Bitcoin has expanded over 60% this year due to inflation coming down and forecasts around future interest rates softening. However, thin liquidity can also amplify moves downward as well as upward in the long-term which could pose a risk for markets.

US Regulatory Climate

The US regulatory climate is seen as a contributing factor that is leading to money leaving the crypto sector, with two prominent market makers scaling back operations in the US amidst increasing scrutiny on the industry from agencies like the SEC. Crypto firms are being accused of “mass non-compliance” rather than lack of regulatory clarity being blamed for issues within crypto markets.

Implications

The implications for cryptocurrency markets are that it needs more capital if it wishes to establish itself in the mainstream and become less reliant on unstable price moves due to shallow order books. The SEC’s continued crackdown on crypto firms may make it difficult for this goal to be achieved any time soon despite rising prices at present.

Conclusion

Cryptocurrency prices have been able to rise rapidly over recent months due largely in part to low liquidity making it easier for traders and investors alike move orders through shallow order books. However this trend comes with risks and further capital needs to enter into cryptocurrencies if they are ever going reach their potential as mainstream assets.