Bitcoin traders are taking a breather as the market digests the collapse of Silvergate Bank, one of the major fiat payment rails in the crypto market. The bank culminated in its “voluntary liquidation” on Wednesday U.S. time, which has resulted in a significant drop in Bitcoin volume over the past 24 hours. 

According to CryptoQuant data, transfer volume, denominated in BTC, is down 35% during this same time period. The total number of transactions on the Bitcoin blockchain has also dropped by 17%, and the number of active addresses has fallen by 10%.

Bitcoin Trading Volume Dwindles

For the month of March, bitcoin trading volume has come in at an average of around $25 billion, compared to around $36 billion for the month of February, according to data from CoinGecko. Guilhem Chaumont, CEO of Paris-based market maker and brokerage Flowdesk, reportedly told CoinDesk that:

“coupled with the drop in the price of bitcoin, we have seen a noticeable drop in trading volumes too, across the ecosystem when news about Silvergate’s financial difficulties broke.”

Silvergate’s Collapse and the Shift to Stablecoins

Silvergate was a major fiat payment rail in the crypto market, offering traditional banking services to exchanges and market makers. As such, trading volumes have dwindled since Silvergate’s problems became public. 

With the death of Silvergate, stablecoins will likely become even more ubiquitous among traders. Analysts at Paris-based crypto data provider Kaiko noted, “rather than deposit your dollars with an exchange, you deposit them with a stablecoin issuer, receive stablecoins, and then transfer those to an exchange.”

What’s Next for Bitcoin?

Most of the trading volume is already concentrated in USDT pairs. Data tracked by Kaiko show BTC/USDT pairs account for over 90% of the trading volume, up from 3% in 2017. BTC is currently worth $21,690 at press time, and the price has recently dropped below the neckline after forming a bearish three-drives reversal pattern. The following support levels for BTC are $21K and the 200-day moving average, standing at $19.7K.

According to Chaumont, trading has since then been quiet, and the first shock has been priced in while traders digest the situation. He suggests that the market is not shaking it off, but the situation can still go either way, meaning that if news about a reassuring resolution came, the confidence that characterized the first two months of 2023 could return.