China’s recent crackdown on crypto trading caused shockwaves in the market. Bitcoin and other altcoin prices plunged sharply following the announcement. But, as is the norm with crypto-related news, the market rebounded as more resilient traders found ways to take part in the market.
China’s crackdown on cryptocurrency trading seems to have been part of its goal to discourage the use of cryptocurrencies by citizens. However, these tactics appear to be counter-productive as token prices and protocol activity for projects such as Uniswap and dYdX seem to have increased since the crackdown.
Chainalysis data shows that there have been significant regional Bitcoin (BTC), flows within eastern Asia. This is highlighted by the orange bar in the graph. This indicates that crypto owners in the region have been moving around their holdings to counter the regulatory crackdown.
Regional BTC flows Source: Chainalysis
Chainalysis states that assets tend to flow within a given region, probably due to preference for local exchanges. However, flows between regions can occur because of regulatory concerns, geopolitical shifts or significant market price fluctuations.
Combining the fact that there are no flows from Eastern Asia and crypto exchanges such as Huobi or Binance suspending service for Chinese residents, it suggests that funds are being held within the region but not on central exchanges.
Huobi users apparently moved $ETH, #stablecoins and DEX tokens from Huobi to decentralized exchanges such as Uniswap. After Huobi suspended accounts in mainland China, outflows spiked. Ironically, this time regulation was a catalyst for decentralization. pic.twitter.com/EKpkHIdSv0
— Ki Young Ju jugiyeong (@ki_young_ju) September 29, 2021
Related: Coinbase’s spot market volume beats Derivatives DEX, dYdX amid China FUD
DeFi Ecosystem gains
As traders in China look for a safe haven to conduct their crypto activities, there was also an increase in activity on exchanges such as Uniswap or the decentralized derivatives exchange dYdX.
Uniswap trading volume vs. total revenue. Source: Token Terminal
DydX is an especially useful data point because it is the most used decentralized derivatives trading platform. It has also seen a surge in demand since regulators around the globe dropped the hammer against centralized exchanges that have loose KYC policies and offer derivative services.
Token Terminal data shows that dYdX is at the top-5 for several categories, including the increase of token price, total revenue, fees paid and the price-to-sales ratio. In terms of total value locked (TVL) increases, the exchange rose to the top 6.
Total revenue vs. the total value of dYdX. Source: Token Terminal
A closer examination of the data shows that both layer-two protocols (ETH) and their competitors have seen the largest gains over the last week. This is due to Avalanche-based protocols such as Pangolin and Trader Joe, as well the Fantom network.
The most important thing is that recent data indicates that the decentralized financial ecosystem is still performing as it was intended. It provides a uncensorable platform for crypto holders to transact without the oversight and control of financial regulators and governments.
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Eileen Wilson –Technology and Energy
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