In the News - 7. Dex Season

• by potmo

With the collapse of FTX, do users want to remove their crypto from centralized exchanges and use decentralized options for trading?

Examine the following:

• How have the number of DEX users changed? Are there more unique users?
• Have the number of swaps changed?
• Has the volume (in USD) changed?

Your analysis should include multiple exchanges and at least 2 different blockchains.

Introduction

The news of the demise and bankruptcy of FTX rocked the crypto world and got and is continuing to get a large amount of attention from the mainstream media. The spin is that this is more evidence of how terrible and shady decentralized finance (DEFI) is.

Crypto OGs know that, in fact, this was once again proof of the superiority of DEFI. Central exchanges are basically just like traditional finance ('tradfi') brokerage firms. They hold your assets.

One of the key tenets of the web3 vision is that the individual maintains ownership of his own funds and does not need a third party to decide what to do with your funds.

It was centralized players, who's information was not on the blockchain who abused the trust of their clients with tradfi opacity in their investment practices that were the cause of the scandal.

Meanwhile, those that chose to put their faith in themselves, rather than centralized entities with a history of using their clients funds to speculate on undercollateralized, overleveraged investments, didn’t lose money.

Given the revelation that even a US regulated CEX, of top tier reliability, isn't necessarily a great group of folks for one to give custody of their funds to, the question which begs to be asked, is that which we will address in this article:

Did DEFI experience a flow of users from centralized exchanges?

Before we go any further, we have to acknowledge that any change in transaction volume or number of users could be due to general "risk off" reactions to the sharp decline in crypto prices across the board. We also need to consider whether behaviors are permanent or just a short term reaction to events. While selling activity and uneasiness began on November 2. Things didn’t really get out of control until November 6th.

Methodology:

We look at a variety of DEXs, comparing activity before and after the unravelling of FTX. Specifically, we will examine

• Total unique swappers
• Total swaps
• Swap volume
• New users over the past two months and for the year

We examine the following exchanges:

• Ethereum - Uniswap v2 and v3
• Ethereum - Sushiswap
• Ethereum - Balancer
• Ethereum - Curve
• Arbitrum - Sushiswap
• BSC:Sushiswap

If You're New to Flipside

• From within the charts, you can hover over the three dots and choose from
  • SQL code
  • a CSV file of the data
  • an API URL with a JSON object of the data
• If you hover over the charts, you can see the values.
• You can click on and off the little squares with labels in the legend.

References:

FTX Crash Timeline (Nerd Wallet)

Coindesk article suggesting CEXs still rule

Unique Swappers

Total Swaps

Swap Volume

New Users

New Users – Zooming in

What the Pictures Mean:

• The week of Nov 6th saw a signifcant increase in active and new users, doubling over the previous week and hitting the highest level since June. There was a less significant but substantial increase in number of swaps. Volume was actually fairly stable, with the exception of Curve and Sushiswap on Arbitrum where a noticable spike is seen.
• While these increases are visible, they do not stand out as outliers. Many weeks, earlier in the year, had bigger numbers and while the week over increase was one of the highest, it was not the highest.
• An approximate doubling of new users occured, strongly suggesting that the bankrupcy of FTX was a catalyst for a group of users to go the non-custodial route.
• However, subsequent weeks showed a steady decline and the rate of new users entering DEFI has returned to levels before, indicating more of a fad than a trend.
• Much of the swap activity can be attributed to the general FOMO of the period. It is hard to determine to what degree the increases were due to a choice of DEX over CEX as opposed to general increased selling activity.