In the past few months, China has taken some huge strides that have rocked both global crypto and financial markets. The debt crisis of the Chinese real estate giant Evergrande has rocked the stock markets, as has the US Securities and Exchange Commission a consistent signal regarding the upcoming regulation of stablecoins, DeFi continues to influence market sentiment.
While Evergrande’s saga has been resolved somewhat, government crackdown on unregistered DeFi platforms and stablecoin trading continues for the time being. Accordingly, the volume of cross-chain Layer 1 protocols and Layer 2 solutions is increasing as retailers look for decentralized places for interaction.
According to CryptoQuant CEO Ki Young Ju, major exchanges like Huobi stopped serving accounts in China after China announced a ban on all crypto exchanges.
This has sparked the inflow of money from many centralized exchanges (CEX) in Asia to switch to the decentralized exchange (DEX) and the wider DeFi ecosystem.
“It looks like Huobi users have moved ETH, stablecoins and DEX tokens to a decentralized exchange like Uniswap. The outflow transactions soared after Huobi announced it would freeze existing accounts in China. Ironically, this regulation leads to decentralization. “
Number of outflow transactions from Huobi | The source: Ki Young Ju
This phenomenon is particularly interesting and warrants further consideration given that Ethereum’s London hard fork fails to address the excessive gas fees and US and Chinese government concerns about cryptocurrencies.
Let’s take a look at some of the recent booms in DEXs and popular protocols that have seen increased inflows.
Ethereum is by far the dominant smart contract network and home to the largest and most widely used DEXs like Uniswap and SushiSwap, according to data from Dune Analytics.
Monthly DEX Volume | Source: Dune Analytics
Although China’s recent crypto ban caused a stir in the last two weeks of September, the first announcement was made on September 3rd. At the same time, the activity on Uniswap was higher.
Uniswap Trading Volume and Total Revenue | Source: Token Terminal
As shown in the graph above, Uniswap activity and trading volume actually began to skyrocket on August 28th and stayed above the previous average for the next several weeks.
Uniswap also benefits from the recently announced integration with the newly released Layer 2 solutions Optimism and Arbitrum, which reduce transaction fees and accelerate confirmation times for users on the network.
The Fantom protocol has become widely known in recent months with the launch of a bridge to the Ethereum network and a 370 million FTM developer incentive program to attract new projects to the Fantom ecosystem.
Data from Token Terminal shows that although the incentive program announcement on August 30th boosted log revenue and token prices, activity was only active after the regulatory announcement from China on September 3rd. Activities and new income increase really sustainably.
FTM price and sales of Protocol | Source: Token Terminal
Fantom uses a non-acyclic oriented graph (DAG) architecture that enables high throughput with almost zero fees, making the protocol increasingly popular with DeFi and NFT traders after exiting Ethereum for too high a cost.
SpookSwap and SpiritSwap are the two top DEXs in the Fantom network and currently handle an average total trading volume of 95 million US dollars in 24 hours.
Avalanche is a blockchain protocol that has been gaining traction since the Avalanche Rush liquidity mining incentive program was launched in mid-August. The program includes over $ 180 million worth of rewards and incentives to generate liquidity for the DeFi ecosystem on Avalanche.
price AVAX and revenue of Protocol | Source: Token Terminal
Since the incentive program started in mid-August, the protocol’s revenue and AVAX price have gradually increased as users transfer assets across the chain to participate in Avalanche’s growing DeFi ecosystem.
According to data from DefiLlama, the top DEXs on Avalanche Trader Joe (JOE) and Pangolin (PNG), which currently have a combined average 24-hour trading volume of $ 355.2 million.
The decentralized trading protocol for perpetual contracts dYdX exploded in September after the airdrop of its native token DYDX, which also increased user activity and volume.
According to Token Terminal, the daily trading volume on the exchange rose in the last days of September from an average of just under $ 2.1 billion to over $ 9 billion on September 27.
Total value locked on dYdX and Trading volume | Source: Token Terminal
The regulatory crackdown has created a lot of trouble for derivatives and leverage traders on exchanges like BitMEX and Binance, which has led to increased demand for decentralized options like dYdX and Hegic.
While many people complain about China’s crackdown, their drastic decision may actually have been “a godsend”. It has spurred venture capitalists to leave CEX and join the fast growing DeFi ecosystem, giving them decentralization and the ability to “be their own bank”.
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According to Cointelegraph