Last week, China’s massive crackdown on ephemeral crypto trading sparked shock waves across the market as bitcoin and altcoin prices plummeted following the announcement, but as was the case with bitcoin, you see other opportunities to enter the market.
Part of China’s goal of restricting its citizens’ ability to trade cryptocurrencies appears to focus on discouraging cryptocurrency usage and the growing decentralized finance (DeFi) ecosystem projects like Uniswap (UNI) and dYdX have been around since the beginning of the Raid increased.
According to data from Chainalysis, there has been a significant regional inflow of Bitcoin (BTC) in East Asia, highlighted by the tall orange bar in the graph below. This suggests that crypto holders in the region have relocated their holdings in response to regulatory action.
As Chainalysis noted, “assets often flow within a region, possibly due to a preference for local exchanges, but transregional flows often arise because of regulatory concerns, fairly significant geopolitical or market price movements.”
The lack of outflows from East Asia, coupled with the suspension of services to Chinese residents by crypto exchanges like Huobi and Binance, suggests funds are being held in the region, but not on exchanges.
Off-chain transactions spiked after Huobi announced it would freeze existing accounts in mainland China.
Ironically, this timing leads to decentralization. pic.twitter.com/EKpkHIdSv0
– Ki Young Ju (@ki_young_ju) September 29, 2021
Related: DEX dYdX derivatives beat Coinbase spot markets in volume amid China’s FUD
Benefits in the DeFi ecosystem
Simultaneously with this growing movement in East Asia, activities on decentralized exchanges such as Uniswap and the decentralized derivatives exchange dYdX have increased as traders increase in China, a nation looking for a safe haven for its crypto activities.
DydX is an especially useful data point as it is currently the most widely used decentralized derivatives exchange and has seen a surge in demand after regulators around the world abandoned exchanges.
According to data from Token Terminal, dYdX was in the top 5 rankings in several categories for the past week, including Token Price Increase, Total Revenue from the Log, Fees Payable, Price-to-Revenue Ratio, and Ratio. Income ratio or the stock market also rose to the top 6 in terms of Total Value Locked (TVL) earnings.
A closer look at the available data also reveals that Layer 2 protocols and their rivals from Ethereum (ETH) have also seen some of the biggest gains over the past week, led by crypto exchanges; Avalanche-based protocols like Trader Joe and Pangolin, such as the Fantom network.
Most importantly, recent data shows that the decentralized financial ecosystem is working as originally intended, providing cryptocurrency holders with an immutable pathway for transactions that are beyond the control and goals of governments and financial regulators.