In Q1 of 2023, the cryptocurrency market saw a significant boost in liquidity as Uniswap V3, the largest decentralised exchange platform, recorded an impressive 208% surge in liquidity. This growth came as the major centralised exchange (CEX) platforms, Binance and Coinbase, experienced declines of -6.35% and -13.4% respectively, due to the effects of various regulatory pressures, lawsuits and settlements such as Coinbase's $100 million settlement with the NYDFS and Biance's lawsuit from the CFTC.

On-chain data also shows a decrease in market depth for the leading trading pairs, BTC-USD and BTC-USDT due to faliures from banks such as Silvergate Bank, Signature Bank and Silicon Valley Bank (SVB). This resulted in market liquidity reaching its lowest levels since 2020, with a slight increase being seen in March. CCData further noted how this affected the reserves of centralised exchanges, with a significant drop also being seen.

Despite negative impacts in the market, the first quarter of 2023 also highlighted how Bitcoin (BTC) was able to rise to 45.2%, its highest market dominance since 2021. Additionally, Ethereum's (ETH) continued its dominance in the DeFi sector and Tether (USDT) made up over 60% of stablecoin transactions during the quarter.

Overall, Uniswap V3's boost of 208% in liquidity compared to the decreases from centralised exchanges provided an interesting contrast, evidencing how the liquidy of decentralised exchange platforms has the potential to increase in the face of regulatory pressures.



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