Data shows crypto holders increasingly turning to DeFi and DEX protocols as China continues its crackdown on cryptocurrencies and fears of heavy regulation scare US-based traders.
China’s harsh crackdown on cryptocurrency exchanges briefly sent shockwaves through the market last week, with bitcoin and altcoin prices plummeting after the announcement, but as is. As with everything related to cryptocurrencies, the market has rebounded as resilient traders have found other ways to participate. in the market.
Part of China’s goal in limiting citizens’ ability to trade cryptocurrencies appears to be to discourage the use of cryptocurrencies and the growing ecosystem of decentralized finance (DeFi), but these maneuvers appear to have the opposite effect, as the price of tokens and protocol activity. for projects like Uniswap (UNI) and dYdX they have increased since the crackdown began.
According to data from Chainalysis, there have been a significant number of regional transactions. Bitcoin (BTC) in East Asia, as shown by the large orange bar in the chart below. This suggests that cryptocurrency holders in the region have moved their holdings in response to regulatory crackdown.
Regional BTC feeds. Source: Chainalysis
As Chainalysis puts it, “Assets normally flow within a region, possibly due to preferences for local trade, but flows between regions often occur as a result of regulatory concerns, geopolitical shifts or significant market price fluctuations. “
The lack of flow from East Asia, combined with cryptocurrency exchanges such as Huobi and Binance suspending services for Chinese residents, suggests that funds are being held in the region, but not on centralized exchanges.
Earnings in the DeFi ecosystem
At the same time that this increased movement was taking place in the East Asia region, activity on decentralized exchanges such as Uniswap and the decentralized derivatives exchange dYdX is increasing as Chinese traders seek refuge for their products.
DydX is a particularly useful data point as it is now the most widely used decentralized derivatives exchange and saw a surge in demand after regulators around the world dropped the hammer on centralized exchanges with flexible KYC policies offering. derived services.
Based on data from Token Terminal, dYdX is in the top 5 of rankings for many categories over the past week, including token price increase, total protocol revenue, fees paid, price / price ratio, sales and the price / earnings ratio. The exchange also ranked in the top 6 in terms of an increase in total blocked value (TVL).
Total income compared to the total value locked in dYdX. Source: Token Terminal
A closer look at the available data also shows that competitors to the Layer Two and Layer One Ethereum (ETH) protocols have also seen some of the biggest gains over the past week, led by Avalanche-based protocols such as Trader Joe and Pangolin, as well as the Fantom Network.
Above all, what the recent data shows is that the decentralized financial ecosystem is working as originally intended by providing an uncensored means for cryptocurrency holders to transact online outside of the control and reach of governments and financial regulators.