Declining DEX Volumes Reflect DeFi Investors’ Switch to Bitcoin – Data Shows


All eyes are on Bitcoin (BTC) as the digital asset continues to climb to a new high in 2020. Meanwhile, the hype around decentralized funding projects continues to die down, especially as symbolic prices fall. Data shows that the volume of trade for decentralized exchanges (DEX) is declining rapidly, further signaling the decline of the DeFi sector.

The recent Harvest Finance hack saw volumes explode in DEXs for a day, especially Uniswap and Curve. According to media and Harvest investors, the hacker performed a flash lending exploit that used millions of dollars in cryptocurrency on both Uniswap and Curve to lower the perceived prices of USDT and USDC tokens on Harvest. Finance.

The attacker then bought these tokens at a reduced price, used them to pay off the initial flash loan, and made a net profit in the process. By doing this several times, Uniswap’s volumes were inflated.

While the hack took DEX’s daily volume to just over $ 5 billion for the day, the anomaly was short-lived and since then the volume still appears to be steadily declining.

DEX daily volume. Source: Dune analysis

During the second half of October, DEX had the worst week in terms of trading volume since August. Weekly volume fell from a record $ 8 billion in the first week of September to around $ 3 billion from October 19 to 25. Uniswap continues to lead the pack with a 56% market share of all DEX trading volume.

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Weekly DEX volume. Source: Dune analysis

Despite the major correction seen in DeFi assets and the reduction in trading volume, the total value locked in has remained near record levels. Data from DeFi Pulse shows the total locked-in value is currently $ 11.2 billion, down slightly from the all-time October 25 high of $ 12.46 billion.

Total Locked Value (USD) in DeFi. Source: DeFi Pulse

DeFi season ends just as the Bitcoin bulls return

As the hype around decentralized finance recedes, Bitcoin is once again in the spotlight. The price of Bitcoin has climbed around 24% since the start of October, with several high-level bets being made by corporate giants like Square and Paypal, the latter of which may help triple the user base. of Bitcoin in the near future.

The reduction in trading volume for DeFi shows that traders have lost interest to some extent, taking profits and returning to Bitcoin. This is further reinforced by the increasing volumes seen on Bitcoin derivatives.

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Volume of BTC futures contracts per exchange. Source: Digital asset data

While it is difficult to discern the impact of institutional players on Bitcoin price action, recent acquisitions and surges in options and futures volumes indicate that the bulls are in play.

Following PayPal’s announcement to add Bitcoin to its platform, the price of BTC has increased by almost 10%. On October 23, Grayscale announced that $ 300 million in crypto assets had been added in a single day and that the company currently has $ 7.6 billion in assets under management.