USDC Purchases on DEXs Spike After Silicon Valley Financial institution Collapse

Blockchain analytics agency Chainalysis has reported a big shift of funds from centralized exchanges (CEX) to decentralized exchanges (DEX) following the collapse of Silicon Valley Financial institution (SVB).

In a March 16 weblog submit, Chainalysis defined that in instances of market volatility, capital outflows from CEXs typically spike, as customers might fear that they won’t be able to entry their funds if the change crashes.

Hourly CEX-to-DEX outflows spiked above $300 million on March 11, shortly after SVB was shut down by California regulators, in response to Chainalysis information. An analogous development was noticed throughout the collapse of crypto change FTX final 12 months, and there are issues that the contagion may unfold to different crypto companies.

Nonetheless, information from Token Terminal, a blockchain analytics platform, means that in each instances, the surge in day by day transaction volumes on the massive DEXs was short-lived. This implies that whereas customers might briefly flock to DEXs following an change crash, the shift is just not essentially long-term.

Notably, Chainalysis additionally reported a spike in purchases of the stablecoin USDC on DEXs, doubtless resulting from USDC being pegged to the U.S. greenback and thus offering a protected haven for customers trying to park their funds throughout risky instances. How lengthy will this development proceed? And whether or not it’s going to have any lasting influence on the crypto market stays to be seen.

Whereas the collapse of SVB might have been the rapid catalyst for this shift in consumer conduct, it additionally highlighted the potential dangers related to centralized entities within the crypto ecosystem. Because the business continues to mature, we’re prone to see extra customers flip to decentralized exchanges to realize higher management over their funds and reduce counterparty danger they face.