Why Trading Volume Is Dropping After Crypto Restrictions

2 November 2025

When crypto prices go up, you expect more people to trade. But in 2025, something strange happened: Bitcoin hit a new all-time high, yet trading volume on major exchanges plunged by nearly 28% in just one quarter. That’s not normal. And it’s not because people lost interest. It’s because crypto regulations changed the rules overnight.

Regulations Didn’t Kill Trading-They Moved It

In early 2025, the U.S. passed the GENIUS Act, requiring stablecoins to be fully backed by U.S. dollars and forcing exchanges to get federal licenses. Crypto.com, once the second-largest exchange globally, saw its trading volume crash 61% in Q2 2025. Why? Because it chose to comply. Other exchanges didn’t. MEXC, HTX, and Bitget grew because they shifted operations to places like Dubai and Singapore, where rules were clearer-or absent.

This isn’t about people quitting crypto. It’s about where they can trade. When regulators crack down, traders don’t vanish. They migrate. And the volume doesn’t disappear-it gets redistributed.

Who Got Hit Hardest?

The pain wasn’t spread evenly. Exchanges in the U.S. and parts of Europe took the biggest hits. CoinGecko’s Q2 2025 report showed that exchanges operating under unclear or changing rules-like India and some EU countries-saw volume drops of 22% on average. Meanwhile, places like Japan and Switzerland, with well-defined frameworks, only saw 7% declines.

The difference? Certainty. If you know exactly what’s allowed, you can plan. If you’re waiting for the next government announcement to drop, you sit on the sidelines. That’s exactly what happened. Traders paused. Institutional investors held back. Even retail users waited to see if their favorite coins would get delisted.

Stablecoins Got a Makeover, Not a Death Sentence

One of the biggest surprises? Stablecoins didn’t die-they evolved.

USDT and USDC still handle over $1 trillion in monthly volume. But now, new players are rising. EURC, a euro-backed stablecoin built under the EU’s MiCA regulations, grew from $47 million to over $7.5 billion in monthly volume in just one year. Why? Because institutions needed a compliant way to move money without risking regulatory fines.

The GENIUS Act didn’t stop stablecoins. It forced them to become more transparent. And that’s exactly what Wall Street wanted. Hedge funds and asset managers didn’t stop using crypto-they just started using the ones that passed the audit.

Illicit Activity Plunged-But So Did Trust

Here’s the paradox: as regulation tightened, illegal crypto activity dropped by 51% in just two years. TRM Labs reported that illicit transactions fell from 0.9% of total volume in 2023 to just 0.4% in 2025. That’s a win for safety.

But here’s the catch: users didn’t cheer. On Reddit and Trustpilot, complaints about exchange restrictions skyrocketed. Users lost access to tokens they’d held for years. Verification processes became a nightmare. One user on r/CryptoCurrency wrote: “I couldn’t trade my ETH because the exchange suddenly said it was ‘non-compliant.’ I lost $12,000 in liquidity.”

Trust didn’t vanish. It just moved. People in Switzerland and Singapore now say they feel safer trading. But in places with heavy-handed rules, users feel like they’re being punished for using a technology they believed was free.

Why Bitcoin Rose While Everything Else Crashed

While altcoins struggled under regulatory scrutiny, Bitcoin surged over 30% in Q2 2025. Why? Because it’s the only crypto that regulators can’t easily classify as a security. The SEC has tried. Courts have pushed back. Bitcoin is seen as digital gold-not a stock.

As a result, institutional money flowed into Bitcoin ETFs. In one week in 2025, over $5.95 billion poured into U.S.-listed Bitcoin ETFs. That’s more than the entire crypto market cap in 2017.

Bitcoin didn’t escape regulation. It just passed the test. Other coins? Many didn’t even get a chance to try.

The Real Winner? Clarity

The biggest takeaway? Markets hate uncertainty. They don’t hate regulation.

Look at the EU’s MiCA framework. It’s complex. It’s strict. But it’s consistent. Exchanges knew what to build toward. Stablecoins adapted. Investors felt protected. Volume dipped-but only briefly. Now, it’s coming back.

Compare that to the U.S., where rules are still being debated in court. Some exchanges shut down. Others moved. Traders are confused. The result? A fragmented market. A lost quarter of trading volume. And billions in missed opportunity.

JPMorgan predicts stablecoins will drive $1.4 trillion in additional dollar demand by 2027. But that only happens if rules are clear. If they’re chaotic, capital flees-not to crypto, but to traditional finance.

What Comes Next?

By late 2025, the worst of the volume drop is over. Exchanges have restructured. Traders have adapted. The market is settling into a new rhythm.

CoinGecko projects trading volume will start growing again in Q1 2026. Why? Because the rules are now known. No more guessing. No more last-minute delistings. Just compliance.

The real question isn’t whether regulation hurts trading. It’s whether we want a market that’s safe-or one that’s free. Right now, we’re getting both. But only if we accept the cost.

The volume didn’t disappear. It just got smarter. And that’s not a decline. That’s a maturation.