As the cryptocurrency market faces increasing regulatory pressure and uncertainty, trading volume for altcoins has fallen significantly since May.
Altcoin trading volume has struggled to regain pre-May levels, according to cryptocurrency data firm Kaiko.
Jeff Park, head of alpha strategies at Bitwise, said regulatory pressure on Binance has reduced trading interest in altcoins. “If you focus on the extraordinary role BNB and Binance Launchpad play in the altcoin ecosystem, it may come as no surprise that Binance's ongoing legal issues have dampened trading interest,” Park said.
However, BUSD supply has fallen by over 80% in the past year, according to Park. He said this has serious implications for altcoin trading, as the focus on alternatives like FDUSD or TUSD creates a bottleneck for pairs where altcoin liquidity is typically measured and accessed:
“At its peak there were over 300 BUSD trading pairs, and the number is gradually decreasing as BUSD ceases its operations.”
Wolfe Research's Rob Ginsberg noted that weak price action and low trading volume have largely shaped altcoin trading in the current market. Despite some isolated positive developments, they are trading “horribly” as they “still haven't capitalized on any Bitcoin rallies,” he said.
Aubert: “As Summer Ends, Investors May Return to the Market in September”
Kaiko analyst Aubert said that the factor that he thinks will reverse the current situation in altcoins is the possibility of investors returning to the market in September as the summer ends and added:
“However, given some disappointing data out of China in recent weeks and ongoing Fed quantitative tightening, the overall macro backdrop remains challenging for risk assets and altcoins are sensitive to fluctuations in risk sentiment. In order for the situation to change in general, capital needs to start flowing into this area. “A spot BTC ETF could act as a catalyst, but we are still months away.”
*This is not investment advice.