Crypto Ecosystem Sees Slowdown in January
The growth of the cryptocurrency ecosystem experienced a notable slowdown in January, as total trading volume plummeted by 24%. This information was highlighted in a research report released by Wall Street bank JPMorgan (JPM) on Tuesday, which referenced data from TradingView. Despite the downturn in trading activity, it’s important to note that the overall market activity remains robust, being nearly double the levels recorded before the U.S. elections in November. Additionally, the total market capitalization of cryptocurrencies rose by 8%, reaching approximately $3.4 trillion, according to the report.
The increase in market capitalization has primarily been driven by significant gains in major cryptocurrencies such as Bitcoin (BTC), Solana (SOL), and XRP. However, the report pointed out that the decline in average daily volume (ADV) was widespread across the crypto ecosystem.
Analysts at JPMorgan, led by Kenneth Worthington, noted, “We believe the election served as a catalyst for the surge in activity, and now both trading activity and token price levels are in a phase of finding their equilibrium in the aftermath of the election.”
On a monthly basis, decentralized finance (DeFi) and non-fungible tokens (NFTs) fared even worse, with a significant deterioration observed across various metrics. This downturn underscores the challenges these sectors are currently facing.
Despite these challenges, there has been some positive movement on the regulatory front. The new Trump administration has established a dedicated crypto taskforce, and the controversial accounting rule known as SAB 121 has been rescinded, which could pave the way for a more favorable environment for cryptocurrency operations, as noted by JPMorgan.
