Recently, the closure of major banks like Silvergate and SVB has had the American financial system in crisis. Expectations of extra US dollar liquidity to bolster the banking industry in the aftermath of a spate of forced closures have aided the Bitcoin (BTC) surge. However, Morgan Stanley stated in a research report published on Sunday that other factors are also at work.
A number of fintech payment companies and offshore banks are attempting to fill the void left by the failures of the major banks in the United States, but it will likely take time before new banking networks are established, according to a research report released Wednesday by JPMorgan (JPM).
According to the bank, stablecoin trade volumes increased following March 8, when crypto-friendly bank Silvergate announced it will voluntarily dissolve and wind down operations. It is noted that tether (USDT) has a greater market share.
“In the meantime, crypto market participants and investors appear to have become more reliant on stablecoins to move money around,” analysts led by Nikolaos Panigirtzoglou wrote.
Bitcoin, the world’s most valuable cryptocurrency by market capitalization, has gained 69% per year so far. Bitcoin trading book of orders liquidity is at its lowest in a year. This implies that lower volumes can drive larger price moves than they previously could. This was claimed by Sheena Shah, an analyst and her colleagues stated.
Tether (USDT) issuance has increased by 10% in the previous month and 16% this year, but this hasn’t been enough to offset declines in other stablecoins such as Binance USD (BUSD) and USD coin (USDC), according to the document.
Morgan Stanley stated that the Tron blockchain accounts for more over half of total tether supply and 70% of recent issuance. The US Securities and Exchange Commission (SEC) accused Tron founder Justin Sun and his firms of fraud last week. According to the message, Kraken and Binance appear to be the primary receivers of the new USDT.
The tighter regulatory environment in the United States may drive crypto market participants to banking networks in Europe and Asia. However, in the long run, it is critical for the crypto ecosystem to replace the lost banking networks so that fiat cash may be exchanged effectively and securely between market players. This will ensure the stability of the stablecoin universe at the same time.