The shock caused by the historic collapse of FTX is still being felt across the industry, but some segments of the industry, such as DeFi, have actually improved results because of it.
Trading volumes on decentralized exchanges (DEXs) have reached a staggering $32 billion in the last seven days, according to data from Dune Analytics.
Most of the volume comes from Uniswap, which accounts for US$ 20.9 billion of the trades carried out in the same period.
On November 8, volumes on Uniswap more than tripled from the day before. This happened on the same day that Binance announced that it had signed a non-binding agreement to redeem FTX for an undisclosed amount.
Just a day earlier, trading volume had been nearly $1.3 billion—a roughly average day on Uniswap over the last month. However, following the news of the bailout, volumes rose to just over $4.2 billion.
Many exchanges saw a doubling of overnight trades that day, including Curve, with volume rising from $700 million to $1.3 billion.
Smaller DeFi platforms also benefited. On Friday, 1inch network, an aggregation platform for multiple DEXs, tweeted earnings across all of its protocols during the 24-hour period immediately preceding the announcement. Dune’s data indicates that the network posted more than $5.3 billion in volume in the last week.
1/ 📈 In these terrible days, we see more people coming to #DeFi and using #1inch🇧🇷
In the last 24 hours, total direct volumes on 1inch have exceeded $1.94B 🔥
In the last 3 days, the number of daily users of our protocols has increased by almost 20%.
🔗 https://t.co/d9lF0sRwjn pic.twitter.com/UZilIpyOvI
— 1inch Network (@1inch) November 11, 2022
Increases DEX activity
The rising popularity of decentralized exchanges over the past week is not surprising, considering that the biggest horror stories of the ongoing liquidity crisis in the industry—dubbed “Crypto Winter”—have followed a similar pattern.
Lenders such as Hodlnaut, Vauld, Celsius, and Singaporean exchange Zipmex have suspended all withdrawals of crypto from clients because of “recent market conditions,” a euphemism for “we do not have the liquidity to meet pending redemption requests.” All are bankrupt now.
Withdrawal freezes are ostensibly used to “stabilize liquidity”, a phrase used by Celsius’ in their freeze announcement to justify action and paraphrased by several other exchanges that have frozen client funds.
In the case of FTX, the decision to freeze withdrawals was made after the exchange struggled to meet demand for a staggering $6 billion of requests in just 72 hours.
So how can customers avoid the obvious risks of custodianing their cryptos with a centralized exchange? For DeFi fans, the answer is obvious: decentralized exchanges.
As DEXs do not interact with banks, customers already need to have digital assets in their possession to use them; the customer experience is a little more complicated than with centralized exchanges too.
However, what they lose in terms of ease of use, they make up for in terms of security (at least in terms of mitigating some of the damage caused by FTX). This is because DEXs are self-custody solutions.
This means that you is the one who stores the private keys, and unless they are compromised, their cryptos are immune to freezes and outages caused by routine maintenance or problems with the exchange’s liquidity.
If there’s a silver lining to the dire liquidity crises erupting across the industry, it’s that cryptocurrencies appear to be returning to first principles and re-examining their founding ethos of decentralization.
After all, centralized interventions were the reason the cryptoeconomy was created in the first place.
*Translated by Gustavo Martins with permission from decrypt🇧🇷
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