The cryptocurrency market is seeing a shift in trading volumes from fiat currencies to stablecoins, according to institutional cryptocurrency market data provider Kaiko. Its report states that on centralized exchanges, stablecoins represent 78% of all trades, while fiat currencies account for just 19%. The decline in fiat currency trading is most evident in the United States dollar, whose market share dropped from 69% to 47% in just one year.


Declining US Dollar dominance Source: Kaiko

The report highlights Bitcoin’s strong momentum, which has continued to push its price past the $28,000 mark. In fact, the trading volume of cryptocurrencies hit a four-month high on March 14th, reaching $51 billion, according to data from 18 of the most liquid crypto exchanges. The Korean Won is the second most popular fiat-denominated trade currency, representing 39% of all trades on centralized exchanges.

Caption: Trading volumes surged soon after FTX collapse Source: Kaiko

Despite the current performance of Bitcoin, Kaiko highlights concerns about liquidity. The company warns that “liquidity remains thin” and that there is a “2% market depth for BTC-USD and BTC-USDT pairs hit 10-month lows in the aftermath of Silvergate’s collapse.” Furthermore, the report notes that stablecoins are under increasing regulatory scrutiny, with several incidents causing tension in this sector.

Another notable development highlighted in the report is the Bitcoin to Ethereum ratio, which is currently at its highest since July 2022. This suggests that Bitcoin is outperforming the rest of the market, with BTC up 31% compared to ETH’s 18% increase since March 12th. Ethereum’s price has been affected by regulatory challenges and exchange decisions, including Kraken’s recent announcement that it would shut down its ETH staking service.

In contrast, Bitcoin’s declining correlation with equities has been a positive development, with BTC outperforming equities in both absolute and risk-adjusted terms. This suggests that Bitcoin is a viable choice during periods of global economic turmoil.

The declining correlation between Bitcoin and equities is seen as a sign of Bitcoin’s maturation as an asset class, with institutional investors increasingly seeing it as a hedge against inflation and global economic uncertainty.

The regulatory scrutiny facing stablecoins includes concerns about their compliance with anti-money laundering and know-your-customer regulations, as well as their potential impact on financial stability. While Bitcoin is currently outperforming Ethereum, the latter is expected to benefit from several upgrades that will improve its scalability and transaction throughput, as well as reduce transaction fees.