Silvergate troubles affecting crypto’s USD market depth Silvergate troubles affecting crypto’s USD market depth
The significant USD liquidity decline shows Silvergate's role in connecting the traditional financial system and the crypto industry.
3 min read
Updated: Mar. 9, 2023 at 11:08 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Crypto’s US Dollar market depth has significantly dropped over the past month following Silvergate’s struggles, according to Kaiko data.
US exchanges are becoming less liquid.
Kaiko said U.S.-based exchanges and market makers are becoming less liquid as they seem most affected by Silvergate’s implosion.
According to Kaiko data, Bitcoin and Ethereum’s market depth improved across international exchanges like Binance, OKX, and ByBit in the last 30 days. However, they worsened on US-based exchanges like Coinbase and Kraken during the same period.
The crypto market’s liquidity measures how the market can absorb large buy and sell orders without significantly affecting prices.
The on-chain data aggregator noted that the USD’s liquidity level was close to that of Binance USD (BUSD) stablecoin. However, BUSD’s liquidity for its top pairs had dropped by as much as 40% when New York’s financial regulator ordered the asset’s issuer Paxos to stop further mints.
While BUSD’s liquidity level has begun to improve slightly, Kaiko said the Silvergate news was “weighing on USD pairs,” bringing it closer to the level of the embattled stablecoin.
Meanwhile, the liquidity drop across US exchanges appears to have contributed to ETH and BTC’s slight negative market depth over the period.
Silvergate role in crypto’s USD liquidity
The significant USD liquidity decline shows Silvergate’s role in connecting the traditional financial system and the crypto industry.
At its peak, the bank’s Silvergate Exchange Network (SEN) reportedly processed over $219 billion in transfers and generated $9.3 million in revenue during the fourth quarter of the 2021 market rally.
Major crypto firms, including Coinbase, Gemini, Paxos, and Circle, used the services. Unfortunately, these institutions were forced to drop the bank due to concerns about its ability to continue operating.
Altcoins affected
Meanwhile, the worsening liquidity appears to affect altcoins across several exchanges.
Kaiko’s data showed that several exchanges had lost more than 15% of their market depth for altcoins, like Cardano’s ADA, Polygon’s MATIC, Dogecoin’s DOGE, Solana’s SOL, and Polkadot’s DOT during the last 30 days.
According to the data, the least affected exchange was Coinbase, whose depth for these crypto-assets dropped 14%, while others like Bybit and Kraken lost 17% each. Binance and its US subsidiary shed 20%, respectively, while Huobi is down 35%.
Euro’s volume rises against USD.
While USD’s liquidity has been dropping against the crypto market, the European Union’s Euro has been gaining ground against Bitcoin, according to Kaiko data.
Kaiko pointed out that the Euro’s volume relative to USD has nearly doubled since FTX’s collapse in November 2022. According to the firm, Euro’s volume rose to 16% from 9% for BTC markets.
The increased Euro volume has coincided with the rise of Euro-backed stablecoins. As a result, the top two stablecoin issuers, Tether and Circle, have introduced stablecoins backed by the Euro to gain market share.
Mentioned in this article
Bitcoin 
Ethereum 
Cardano 
Dogecoin 
Polkadot 
Solana 
Polygon 
Binance USD 
Circle 
Coinbase 
Binance 
Binance.US 
OKX 
Kraken 
HTX 
Tether Limited 
Silvergate 
Paxos 
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Ethereum
$3,346.26
Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps).
Cardano
$0.79962
Cardano is a decentralized public blockchain and cryptocurrency project and is fully open source.
Dogecoin
$0.38859
Dogecoin is a cryptocurrency created in December 2013 as a joke by software engineers Billy Markus and Jackson Palmer.
Polkadot
$5.91862
Polkadot development is on track to deliver the most robust platform for security, scalability, and innovation.
Solana
$245.983
Solana is a high-performance blockchain platform that utilizes a unique consensus algorithm called “Proof of History” to achieve fast transaction speeds and low fees.
Polygon
$0.45493
Polygon, a prominent layer 2 scaling solution on Ethereum, has emerged as a multifaceted and scalable platform, enhancing the Ethereum ecosystem’s capabilities.
Binance USD
$1.00133
BUSD is a stablecoin issued by Paxos in partnership with Binance..
Circle
Circle Internet Financial Ltd is a global internet finance company, built on blockchain technology and powered by crypto assets.
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
Binance
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies.
Binance.US
Binance.US will provide secure and reliable cryptocurrency trading to users in the United States.
OKX
OKX is a world-leading digital asset exchange, providing advanced financial services to global traders by using blockchain technology.
Kraken
Kraken is a San Francisco-based digital asset exchange in euro volume and liquidity that trades various currencies, including Canadian dollars, US dollars, British pounds, and Japanese yen.
HTX
Huobi, a virtual asset exchange, launched a revised branding strategy on September 13, 2023, where “Huobi” will be rebranded as “HTX.” “H” stands for Huobi, “T” represents TRON with a commitment to being all in TRON, and “X” stands for the exchange.
Tether Limited
Tether Limited is the company that introduced Tether (USD₮ or USDT), an asset-backed cryptocurrency stablecoin, in 2014.
Silvergate
Silvergate is a Federal Reserve member bank and the leading provider of innovative financial infrastructure solutions and services for the growing digital currency industry, based in La Jolla, California.
Paxos
Paxos Trust Company, LLC is a regulated blockchain infrastructure company building transparent and transformative financial solutions.
Gemini
Gemini is a regulated digital asset exchange and custodian that allows customers to buy, sell, store, and stake digital assets in a regulated, secure, and compliant manner.
