Chainalysis: Traditional financial institutions and Bitcoin ETF drive North America to lead globally, while crypto regulation still needs improvement.

The cryptocurrency analysis firm Chainalysis recently released a research report indicating that North America remains the largest cryptocurrency market globally, with crypto activities accounting for 22.5% of the global market. Following the impact of the FTX collapse in 2022 and the Silicon Valley Bank closure in 2023, key factors such as increased market regulation in the U.S., multiple interest rate hikes by the Federal Reserve to combat inflation, the continued entry of institutional investors, and growing hedging demand for Bitcoin have led to a market recovery in the U.S. in 2024, driving Bitcoin to new all-time highs.

US Receives $1.3 Trillion in Cryptocurrency, Mainly Driven by Institutions

A report indicates that from July 2023 to June 2024, North America received approximately $1.3 trillion worth of cryptocurrency, accounting for about 22.5% of global activity. Cryptocurrency activities in the US are mainly driven by institutional participation, with about 70% of the trading volume coming from transfers of $1 million or more, demonstrating the increasing influence of large financial institutions in the crypto market.

Traditional Financial Giants Join In, Market Matures Gradually

The report states that in 2024, with the launch of a Bitcoin spot ETF in the US, traditional finance (TradFi) and cryptocurrency are becoming more integrated. Traditional financial giants like Goldman Sachs, Fidelity, and BlackRock have entered the crypto industry, symbolizing the transition of cryptocurrency from an emerging market to a more mature stage.

CeFi Becomes the Bridge for Institutional Investors to Enter the Crypto Market

Centralized finance (CeFi) platforms like Coinbase and Gemini have become important bridges for institutions to enter the cryptocurrency market, providing secure and simple asset management services. For instance, BlackRock collaborated with Coinbase in 2022 to integrate Coinbase Prime functionality into BlackRock's proprietary investment management platform Aladdin, demonstrating that CeFi indeed serves as a bridge for institutional investors to enter the crypto market. It not only provides a convenient entry point for retail investors but also meets the demand of institutional investors for stable and reliable trading services.

BlackRock Successively Launches IBIT and Ethereum ETF, Key Moment of Integration between Traditional Finance and Cryptocurrency

In January 2024, BlackRock launched the Bitcoin spot ETF IBIT, attracting numerous institutional investors and injecting a significant amount of liquidity into the Bitcoin market, further driving up the Bitcoin price. The approval of IBIT's listing by the SEC can be seen as the beginning of a bull market, pushing the Bitcoin price to surpass $73,000 in March and set a new high. Following the launch of IBIT, BlackRock's asset management scale quickly exceeded $20 billion.

With the launch of an Ethereum ETF by BlackRock in July this year, it quickly reached a scale of $1 billion. The introduction of Bitcoin and Ethereum ETFs can be considered a key moment of integration between traditional finance and cryptocurrency.

BlackRock: Ethereum ETF Narrative Issues Still Need to Be Resolved, Rare to Reach $1 Billion at the Start

Key Factors Leading the US Cryptocurrency Market: Wealth, Population, and Innovation

According to the chart, the US remains a leader in the global cryptocurrency market, with several key factors:

• Huge wealth
• Large population
• Deep and highly liquid capital markets
• Support for financial technology innovation
• US dollar as the main reserve currency in the international financial system
• Favorable investment environment

Significant Volatility in the US Cryptocurrency Market Affects Global Markets

The cryptocurrency market in the US exhibits greater growth volatility compared to the global market. The chart below uses Bitcoin, the US market, and the global market as examples:

• When Bitcoin rises, the growth in the US market is usually larger than that of the global market.
• Conversely, when cryptocurrency prices fall, the decline in the US market is more pronounced than in the global market.

Stablecoin Usage Slows Down, Global Market Competition Intensifies

Although cryptocurrency market activity in the US is vibrant, stablecoin usage is slowing down under increased regulation. However, regions outside of North America such as the EU have enacted MiCA, and the UAE and Singapore are gradually improving cryptocurrency regulations, attracting more stablecoin projects. The rapid growth in these regions may impact the US's leading position in the cryptocurrency market.

The following chart shows the activity of stablecoins on US-regulated exchanges and non-US regulated exchanges, indicating the expanding role of stablecoins in emerging and non-US markets.

Canadian Market Follows Closely Behind US Market

The report shows that although the Canadian market is smaller than the US market, it remains a major participant in the North American market, receiving approximately $119 billion in cryptocurrency from July 2023 to June 2024. The chart below indicates that while the Canadian market closely follows US market trends, its volatility is often lower, with milder bull market gains and bear market retractions compared to the US, and Canada closely related to global trends in asset distribution and trading volume.

In recent years, Canada has strengthened regulation on custody, leverage, and stablecoins, leading to major cryptocurrency exchanges like Gemini and Binance exiting the market. However, this also reflects a maturing regulatory framework.

Gemini decides to exit the Canadian market, closing all customer accounts by the end of the year

However, Canada still has shortcomings in stablecoin and DeFi regulation, and major banks remain conservative towards cryptocurrency, limiting innovation and the availability of banking services related to cryptocurrency. If the government strengthens support and provides clearer market planning, Canada has the potential to play a more significant role in global cryptocurrency adoption in the future.

In conclusion, with the continued participation of traditional financial institutions in the US, the North American market has become one of the main driving forces of the global cryptocurrency market. The key to maintaining a leading position in the cryptocurrency market lies in whether the US can improve its regulatory framework.