Crypto Users Switched to DEXs Following Banks Collapse
Following the indiscriminate collapse of banks (Silvergate, Silicon Valley, and Signature), a number of crypto users have moved their funds from centralized exchanges (CEXs) to decentralized exchanges (DEXs) as per Chainalysis report.
7/ While depositors at the banks that failed over the weekend can rest easy, the threat of further bank crises remains, & there’s still 1 major crypto-specific issue: The 2 banks the industry has most relied on are gone. Learn what to watch for next. https://t.co/O3Qx9aLKyd
— Chainalysis (@chainalysis) March 16, 2023
On March 16, the blockchain analysis firm Chainalysis reported via a blog post that crypto users are more worried than ever and have started moving their funds from centralized exchanges in order to avoid a lack of access to their funds.
It was reported that the outflow of funds spiked tremendously, reaching over $300 million on March 11 following the disclosure that the SVB has been taken over by a California regulator.
Recall that a similar pattern occurred last year during the collapse of the crypto exchange FTX. Many users promptly transferred their funds to DEXs amid fears that other crypto exchanges might be affected.
Meanwhile, USDC was identified as the top digital asset being moved by users to DEXs. This is not surprising following the news revealed by the USDC Issuer Company Circle that it has $3.3 billion stuck in SVB.
The situation affected the stablecoin to losing its dollar peg, which plummeted to an all-time low of $0.87 on March 10. Meanwhile, the stablecoin has regained lost ground and it is trading at $0.99 as per CoinMarketCap data.
NFT Marketplace Sees Similar Fate
Just like the crypto market dropped significantly following the crypto banks’ collapse, the NFT marketplace was not spared as only 11,440 NFT traders were reportedly active on March 11 — which represented the lowest figure since Nov. 2021.
According to a March 16 report by data aggregator platform DappRadar, Non-fungible token (NFT) trading volumes were ranging between $68 million to $74 million before the SVB’s collapse.
However, it drastically dropped to $36 million on March 12 coupled with a 27.9% drop in daily NFT sales count between March 9 to March 11.
It is lucid that both crypto and NFT were affected by the conventional financial crisis. At the time of writing, cryptocurrency seems to have recovered as Bitcoin is trading at $26,701 according to CoinMarketCap data.