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Reviving Altcoin Trading Volume: What It Will Take to Return to First-Half Highs

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The Challenge of Reviving Altcoin Trading Volume

Altcoin trading has been struggling to regain momentum, despite an initial boost from a favorable court ruling for Ripple in July. According to crypto data firm Kaiko, altcoin trade volume, excluding bitcoin, ether, and Ripple's XRP, has been unable to reach pre-May levels. While the court ruling provided some hope that altcoins may not always be classified as securities, the overall market structure of cryptocurrencies has been deteriorating.

The Impact of Bitcoin Dominance and SEC Investigations

Bitcoin dominance, which measures its share of the total cryptocurrency market cap, has weakened after altcoins surged following the Ripple ruling. However, this narrative is not strong enough to overshadow the broader decline in the crypto market structure. The top 10 traded altcoins by dollar volume are still heavily skewed towards tokens under investigation by the SEC, including Solana, Polygon, and BNB. The ongoing downfall of Binance, due to regulatory issues, has also tempered trading interests.

The Role of Stablecoins and Regulatory Scrutiny

Stablecoins, such as Binance USD (BUSD), play a significant role in altcoin trading. However, the SEC's lawsuit against Binance and the decline in BUSD supply have created a bottleneck for pairs trading and impacted altcoin liquidity. The shift towards alternatives like FDUSD or TUSD has further complicated the trading landscape.
The Challenges Ahead for Altcoins
Altcoins face similar challenges to bitcoin in reviving market activity. Regulatory scrutiny has deterred new investors from entering the market, limiting its potential for growth. Weak price action and low trading volume have characterized altcoin trading, despite individual positive catalysts. Seasonality also plays a role, with the final month of a seasonally weak quarter typically experiencing subdued market activity. In conclusion, while there are specific narratives driving certain altcoins, the overall regulatory environment and market conditions present significant hurdles. The return of traders in September after the summer break may bring some changes, but the macro backdrop remains challenging. Capital inflows and the potential introduction of a spot BTC ETF could serve as catalysts for revitalizing altcoin trading, but these developments are still months away. The future of altcoins hinges on navigating regulatory obstacles, attracting new investors, and adapting to evolving market dynamics.

Implications for New Businesses

The struggles of altcoin trading volume present both challenges and opportunities for new businesses in the crypto space. The current regulatory environment underscores the importance of compliance and understanding the legal landscape, especially for businesses planning to engage with altcoins.

Opportunities Amidst Challenges

Despite the challenges, the situation also presents opportunities. The shift towards alternatives like FDUSD or TUSD opens up new avenues for businesses that can navigate these changes effectively. Moreover, the potential introduction of a spot BTC ETF could spur renewed interest in the crypto market.
In conclusion, while the current state of altcoin trading presents significant challenges, it also offers opportunities for new businesses that can adapt to these changes. The key to success in this volatile and complex market lies in understanding and navigating the regulatory landscape, seizing emerging opportunities, and staying resilient amidst market fluctuations. As the crypto market evolves, businesses that can effectively respond to these changes will be well-positioned to thrive. Ultimately, the future of altcoins—and the businesses that engage with them—will be shaped by their ability to adapt to these evolving market dynamics.
Story First Published at: https://www.cnbc.com/2023/09/01/altcoin-trading-volume-is-off-its-first-half-highs-heres-what-it-will-take-to-get-it-back.html
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