North America commands the crypto arena with an unparalleled vigor, but the recent Chainalysis report exposes a landscape rife with volatility and concerns. Amassing an overwhelming $1 trillion in transaction volume between July 2022 and June 2023, the United States and Canada together now wield almost a quarter of the world’s crypto transaction volume. Yet, as one peels away the surface, glaring questions emerge, begging to dissect this so-called supremacy in an industry still battling for mainstream acceptance.
The ghost of large institutional players
Moreover, 76.9% of this colossal transaction volume is driven by transfers exceeding $1 million, largely influenced by institutional investors. Consequently, the crypto space in North America is largely a playground for the financial elite, alienating the average retail user. This could raise alarm bells about wealth concentration and how much power these big players exert over the market. The FTX exchange fiasco and the ensuing trial of its former CEO, Sam Bankman-Fried, did send ripples through the sector. However, the industry was hit harder by regulatory actions against crypto-friendly banks like Silicon Valley Bank, Silvergate, and Signature in March.
This echoes a troubling sentiment: North America’s crypto market appears resilient but vulnerable. The grim reality is that when these institutional behemoths choose to pull back—as was witnessed—the entire market takes a hit. This lack of democratization in the distribution of wealth and control could potentially stifle innovation and sideline the retail investor. Significantly, despite these setbacks, on-chain activity has shown signs of revival since June, primarily because institutional investors have once again found their footing.
The fading glamour of stablecoins
Besides, there is an unsettling shift in stablecoin usage within the region. Once making up 70.3% of on-chain transaction volume, stablecoins have plummeted to account for just 48.8% over the past year. Additionally, their market capitalization has touched its lowest in more than two years. Hence, stablecoins are gradually losing their sheen among users in North America. What’s more concerning is the increasing flow of stablecoins to non-U.S. licensed exchanges, effectively reversing last year’s trend.
U.S. regulators are undoubtedly keen on exerting their influence over stablecoins, given the asset’s ties to USD-denominated reserves. However, more and more stablecoin transactions are being conducted outside the purview of U.S. regulations. This is an ominous sign for a nation that aims to dominate the digital economy. Such a shift could very well signal that users are losing faith in the U.S. as a crypto haven, seeking alternatives that offer more freedom, albeit with increased risks.
As we move forward, Chainalysis also points out that the hegemony North America once had over decentralized finance (DeFi) is waning. The DeFi and centralized exchange volumes are now almost evenly split, indicating a decreased reliance on decentralized protocols. Could this be an early sign of disillusionment or a mere diversification strategy? Only time will tell