The plunge in Bitcoin and Ethereum is undoubtedly tied to the stunning implosion of FTX, which has effectively destroyed confidence yet again in an industry which has already experienced hard times over the course of 2022.
A major setback for CEX (Centralized Exchanges), one significant question prevails – will crypto enthusiasts move away from CEX to DEX (Decentralized Exchanges)?
Binance CEO Changpeng Zhao (CZ) said on his Twitter Space on November 14th that “if everybody withdrew their funds from the centralized exchange, we’ll just shut down the centralized exchange. We have many other profitable businesses. So it’s fine,” signaling that he himself considers truly Decentralized Finance (DeFi) to be the future of crypto, with people holding their own assets independently on-chain.
Filippo Chisari, Web3 Advisor, said:
“The truth is it sets everyone back – the same people that are core believers in blockchain, the innovators and drivers of change, have lost much of what they had, and, above all, some may even have lost belief in the system. Every time there is a “meltdown”, most will jump on the “Told you so!” bandwagon, but the underlying technology of bitcoin will not disappear anytime soon, and blockchain is being increasingly integrated into
society.”
Trading volumes on decentralized exchanges hit a whopping $32 billion over the last seven days, according to data from Dune Analytics, which is hardly surprising given the latest shockwave to hit the crypto space.
With consumers desperate to avoid what appears now to be the obvious risks associated with CEX, the only alternative and safe-bet seems to be DEX. Because DEXs don’t interact with banks at all, customers have to have digital assets in their possession already to use one. And while the user experience does tend to be more complicated than with centralized exchanges, what they lose in terms of ease of use, they can make up for in security (at least in terms of mitigating some of the damage caused by FTX).
Yang Lan of Fiat24, a Swiss Web3 banking concept built entirely on blockchain, said:
“the silver lining to this fiasco is that it is making people reexamine the ethos of decentralization and perhaps even pushing them further into the direction of a new digital asset class where they have more control and ownership than ever before. At the same time, it will also bring about some much needed regulation and attention to the industry, which can only serve us well, as we move into 2023 with the goal of bringing crypto to the masses.”
Some of the major advantages and benefits of DEX include a protective trading environment with no third-parties involved, lower threats of fraud, and a limitless ability to trade tokens of any kind, to name but a few.
With the collapse of various centralized exchanges over 2022, many users have transitioned to their decentralized counterparts. There is a realization of the importance of self-custody, and of the popular crypto phrase, “Not your keys, not your crypto”.
Out of all the large DEXs, Curve gained the most, with its trading volume increasing by 334% in the span of just a week and, with $1.3 billion recorded on Nov. 12, Uniswap is the leader when it comes to sheer trading volume.
“In the short term, this latest scandal will probably be quite bad for the crypto industry,” says Yang, “but I don’t believe that it will have a long-lasting impact. While it may still be too soon to pinpoint precisely what caused this drastic shift, the market crisis caused by the FTX fallout has certainly made users question the security of their funds and pushed traders away from CEX.”
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