DeFi derivatives surge as traders flee exchanges
Crypto markets rallied early on Monday after Binance CEO Changpeng Zhao (CZ) offered to create an “industry recovery fund” that would invest in companies struggling to stay afloat in the wake of the coronavirus crisis. collapse of FTX.
Major cryptocurrencies rose after Zhao announcement just after 1:30 a.m. New York time, despite few details on the proposed fund.
Ether, Bitcoin, and Binance’s own BNB token rose around 4%. Solana, whose ecosystem has suffered more than that of any other major smart contract blockchain over the past week, jumped 13%.
“Given what happened over the past week, there will be a number of good projects – they really haven’t done much wrong, they were building their products, they can have their funds on an exchange that went down,” Zhao said in a Twitter live broadcast Monday morning.
“The best way to help them is [by] give them money or investments. We actually think now is a good time to do so because most of the valuations for these projects are much more reasonable than they were a year ago.
Zhao also defended Binance as a safe place to store his crypto assets, insisting he did not participate in the risky and possibly illegal behavior that brought down FTX.
“We don’t have loans, we don’t have debts, we don’t owe anyone money,” Zhao said. “We are a very clean and very simple company.”
Foreign exchange outflows
Nonetheless, users have been fleeing Binance and other centralized exchanges over the past week, according to a report from Glassnode.
Bitcoin balances on all exchanges have fallen by 72,000 BTC since November 6.
Larger outflows have only been observed in three time periods in the past – April 2020, November 2020 and June to July 2022.
Over a million Ether have been withdrawn from exchanges since November 6.
“This represents the largest 30-day balance decline since September 2020 during the peak of ‘DeFi Summer,’ where demand for ETH was very high to be used as collateral in smart contracts,” Glassnode notes.
Meanwhile, exchanges have hemorrhaged stablecoins — tokens pegged to the value of fiat currencies, typically dollars.
Over the past week, $1.2 billion worth of stablecoins have been withdrawn from Binance, according to data from Nansen, while OKX, KuCoin, Kraken, Bitfinex, and Huobi have each seen their stablecoin balances drop by over $100 million. Stablecoin balances on major decentralized exchanges Uniswap and Curve have also fallen by hundreds of millions over the past week.
However, traders seem to be gearing their business towards DeFi protocols.
Trading volume and fees collected by decentralized derivatives exchanges have skyrocketed since November 7. Trading volume on GMX, a derivatives exchange on the Arbitrum and Avalanche blockchains, more than doubled to over $1 billion between Nov. 6 and Nov. 7.
Trading volume on dYdX, the largest DeFi derivatives exchange by volume, topped $3.5 billion on Nov. 8, its highest level since May, according to data from Token Terminal.
Meanwhile, dYdX’s token is up 60% this month, according to data from The Defiant Terminal.
DYDX AwardSource: The Defiant Terminal
“Regulatory pressures + the FTX situation are paving the way for a massive increase in adoption of DeFi perp exchanges,” Pastry, a pseudonymous Twitter account that tracks DeFi metrics, wrote.
“Currently, DEXes only capture 1.57% of futures volume versus CEX…expect that number to change quickly.”