Last updated on November 17th, 2022 at 01:28 pm
The industry as a whole is still reeling from the effects of FTX’s historic collapse, but some subsectors, like DeFi, are thriving as a result of the crash.
According to Dune Analytics, trading volumes on decentralized exchanges (DEXs) hit a new high of $32 billion last week. The major share, which was $20.9 billion of the trades, was traded on Uniswap.
The volume of transactions on Uniswap on November 8 increased by more than 300% from the previous day. That same day, Binance announced that it had signed a non-binding agreement to save FTX for an undisclosed sum.
Nearly $1.3 billion had changed hands the day before, making that day typical of the last month on Uniswap. However, activity increased to slightly more than $4.2 billion after the bailout news broke.
Curve, like many others, saw a dramatic increase in trading volume that day, from $70 million to $1.3 billion overnight.
DEX Activity Increases
The biggest horror stories of the ongoing liquidity crunch in the industry, which has been called “crypto winter,” have all followed the same pattern. This may be why activities on decentralized exchanges have increased in the past week.
Several cryptocurrency lenders, including Celsius, Vauld, Hodlnaut, and Zipmex, have stopped customer withdrawals because of “current market conditions.” This is a bit of a code word for “not having enough liquidity to meet outstanding redemption requests.”
All these lenders are now bankrupt.
After getting withdrawal requests for a record $6 billion in just 72 hours, FTX had to make the tough decision to stop withdrawals.
Another Reason to Embrace Decentralization
There are clear dangers associated with keeping cryptocurrency in a centralized exchange’s custody. Those who support DeFi believe the solution is simple: decentralized markets.
Customers can only use DEXs if they already have digital assets in their possession, and the customer experience is a bit more complicated than it is with centralized exchanges because DEXs don’t interact with banks at all.
What they lack in convenience, however, they more than offer in safety (at least in terms of mitigating some of the damage caused by FTX) since they are self-custody solutions.
In other words, your private keys are in your possession. Hence, maintenance-related freezes and outages won’t affect your crypto.
Crypto appears to be returning to its first principles and re-examining its founding ethos of decentralization, which is perhaps the only silver lining to the terrible liquidity crises blowing up across the industry. Centralized interventions were the impetus for the development of cryptocurrency.
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