QUESTION
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?
Analyse with multiple exchanges and atleast 2 different blockchain
INTRODUCTION OF FTX
What Is FTX Exchange?
FTX Exchange was a leading centralized cryptocurrency exchange specializing in derivatives and leveraged products. Founded in 2018 by MIT graduate and former Jane Street Capital international exchange-traded funds trader Sam Bankman-Fried, FTX offered a range of trading products, including derivatives, options, volatility products, and leveraged tokens. It also provided spot markets in more than 300 cryptocurrency trading pairs such as BTC/USDT, ETH/USDT, XRP/USDT, and its native token FTT/USDT.12 In early November 2022, the exchange and the companies in its orbit began a steep fall from grace.
The FTX Collapse
FTX's collapse shook the volatile crypto market, which lost billions in value, dropping below $1 trillion.
The consequences of FTX's rapid decline and collapse will likely impact cryptocurrencies well into the future and drag down broader markets. On November 16, a class-action lawsuit was filed in a Florida federal court, alleging that Sam Bankman-Fried created a fraudulent cryptocurrency scheme designed to take advantage of unsophisticated investors from across the country. Other celebrities named in the lawsuit include Steph Curry, Shaquille O'Neal, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin O'Leary who allegedly helped Bankman-Fried facilitate the plan
.FTX Key Products
FTX's key products included futures, leveraged tokens, options, MOVE, and spot markets.156
Futures: Traders could take both long and short bets on leading cryptocurrencies using over 100 quarterly and perpetual futures pairs with margins of up to 101x. Stablecoins, such as USD and tether (USDT), are used as collateral to open and maintain positions.
Leveraged Tokens: FTX offered ERC20-based tokens that provided traders up to 3X leveraged exposure against the underlying trading pair. For instance, if a trader opened a BULL/USD - 3x long Bitcoin token and Bitcoin rallies 10% from the time of purchase, the leveraged token would gain 30%. FTX's leveraged tokens had no margin requirement.
Options: Traders could speculate on future price direction and hedge against their open positions with a range of call and put options that gave the holder the right but not the obligation to buy or sell at a future strike price.
MOVE: These contracts allowed traders to bet how far the price of a cryptocurrency would move over a time period, irrespective of the direction, essentially making them a play on volatility. As long as the price of the underlying cryptocurrency moved over a specific dollar amount—either up or down—the contract generated a profit.
Spot Markets: FTX offered over 100 different spot trading pairs, providing exposure to leading cryptocurrencies, such as Bitcoin, Ethereum, Binance Coin, Chainlink, and Ripple's XRP.
FTX US offered nearly 60 cryptocurrency and currency spot trading pairs, along with options contracts denominated in 0.01 Bitcoin and 0.1 Ether, cryptocurrency swaps, and Bitcoin mini __future__s. It also operated a marketplace for non-fungible tokens.12FTX Key Products
FTX's key products included futures, leveraged tokens, options, MOVE, and spot markets.156
Futures: Traders could take both long and short bets on leading cryptocurrencies using over 100 quarterly and perpetual futures pairs with margins of up to 101x. Stablecoins, such as USD and tether (USDT), are used as collateral to open and maintain positions.
Leveraged Tokens: FTX offered ERC20-based tokens that provided traders up to 3X leveraged exposure against the underlying trading pair. For instance, if a trader opened a BULL/USD - 3x long Bitcoin token and Bitcoin rallies 10% from the time of purchase, the leveraged token would gain 30%. FTX's leveraged tokens had no margin requirement.
Options: Traders could speculate on future price direction and hedge against their open positions with a range of call and put options that gave the holder the right but not the obligation to buy or sell at a future strike price.
MOVE: These contracts allowed traders to bet how far the price of a cryptocurrency would move over a time period, irrespective of the direction, essentially making them a play on volatility. As long as the price of the underlying cryptocurrency moved over a specific dollar amount—either up or down—the contract generated a profit.
Spot Markets: FTX offered over 100 different spot trading pairs, providing exposure to leading cryptocurrencies, such as Bitcoin, Ethereum, Binance Coin, Chainlink, and Ripple's XRP.
FTX US offered nearly 60 cryptocurrency and currency spot trading pairs, along with options contracts denominated in 0.01 Bitcoin and 0.1 Ether, cryptocurrency swaps, and Bitcoin mini __future__s. It also operated a marketplace for non-fungible tokens.12
FTX Key Products
FTX's key products included futures, leveraged tokens, options, MOVE, and spot markets.156
Futures: Traders could take both long and short bets on leading cryptocurrencies using over 100 quarterly and perpetual futures pairs with margins of up to 101x. Stablecoins, such as USD and tether (USDT), are used as collateral to open and maintain positions.
Leveraged Tokens: FTX offered ERC20-based tokens that provided traders up to 3X leveraged exposure against the underlying trading pair. For instance, if a trader opened a BULL/USD - 3x long Bitcoin token and Bitcoin rallies 10% from the time of purchase, the leveraged token would gain 30%. FTX's leveraged tokens had no margin requirement.
Options: Traders could speculate on future price direction and hedge against their open positions with a range of call and put options that gave the holder the right but not the obligation to buy or sell at a future strike price.
MOVE: These contracts allowed traders to bet how far the price of a cryptocurrency would move over a time period, irrespective of the direction, essentially making them a play on volatility. As long as the price of the underlying cryptocurrency moved over a specific dollar amount—either up or down—the contract generated a profit.
Spot Markets: FTX offered over 100 different spot trading pairs, providing exposure to leading cryptocurrencies, such as Bitcoin, Ethereum, Binance Coin, Chainlink, and Ripple's XRP.
FTX US offered nearly 60 cryptocurrency and currency spot trading pairs, along with options contracts denominated in 0.01 Bitcoin and 0.1 Ether, cryptocurrency swaps, and Bitcoin mini __future__s. It also operated a marketplace for non-fungible tokens.12
FTX Fees
FTX competitive futures and spot markets trading fees ranged from 0.04% to 0.07% for market takers, based on the maker and taker model, as of September 2022. Meanwhile, leveraged tokens carried a creation and redemption fee of 0.10% and a daily management fee of 0.03%.14
FTX didn't charge deposit or withdrawal fees for most crypto assets. All bitcoin withdrawals greater than 0.01 bitcoin were free, as was one withdrawal of less than 0.01 bitcoin per day. Additional small bitcoin withdrawals were charged a 0.1% fee.15 Fiat currency withdrawals valued at more than $5,000 USD were free, as was one withdrawal per week below that amount.10
FTX US trading fees for market takers ranged from 0.05% to 0.2% as of September 2022. Fiat currency deposits could be made via wire transfer, ACH, debit or credit card, and Silvergate Exchange Network, all of which (except for debit and credit cards) could be used to withdraw fiat currency. Wire transfer withdrawals over $5,000 USD were free. One withdrawal per week below that amount was also free, but subsequent wires incurred a $25 fee.16 There were no deposit fees for blockchain transfers. FTX US paid the withdrawal blockchain fees for all tokens except ERC20/ETH and small bitcoin withdrawals.17
Non-fungible token (NFT) fees varied on the platform and location of the trade. For FTX US users, it cost $1 to list an NFT using its self-service tool and 2% charged to the seller from each sale or trade.18 Alternatively, FTX (the non-US platform) charged 5% fees to the buyer and seller on each side of the trade.19
FTX Security
FTX boasted risk management features across three primary areas: personal accounts, exchanges, and other security areas.
Personal Account Security
To register an FTX account, the company required a combination that adheres to complex character requirements. In addition, it scanned password requests for predictable patterns; any account not compliant was not allowed to register.
In addition, FTX required users to set up two-factor authentication (2FA). 2FA was required for all withdrawals. In addition, FTX locked withdrawals for an account should an account remove 2FA contact information or if the account's password was changed.
FTX monitored and tracked user activity for suspicious behavior. Should FTX see an unusual login attempt, FTX notified the account owner for further verification to be successfully logged in.20 \n
Exchange Security
FTX contracted with Chainanalysis to identify potentially suspicious trading activity. Chainanalysis is a real-time, anti-money laundering compliance solution that monitors for large deposits or unusual activity.20
FTX also managed a FTX Backstop Liquidity Fund to ensure liquid assets are on hand to facilitate trading. As of September 2022, FTX's liquidity fund balance was approximately $200 million.20
Other Security Features
FTX allowed users to create custom logins through the use of subaccounts. Subaccounts allow multiple people to access the same account; however, each user will have configurable and customizable permission levels. Each log-in can be designated as read-only (can not make any trades but can view historical activity). In addition, different logins can have varying degrees of withdrawal capabilities.
FTX also allowed users to define security permissions regarding internet protocols (IPs) or wallet addresses. This ensures that only specified internet addresses or wallets could transact in relation to a specific account.20
Management and Capital Structures
FTX and FTX US have overlapping management teams. Both companies listed Sam Bankman-Fried as chief executive officer and co-founder Gary Wang as chief technology officer.221
FTX closed a $400 million series C venture capital funding round in January 2022 valuing the company at $32 billion. Participating investors included Temasek, Paradigm, Ontario Teachers' Pension Plan Board, NEA, IVP, SoftBank Vision Fund 2, Lightspeed Venture Partners, Steadview Capital, Tiger Global, and Insight Partners. All investors involved in that funding round simultaneously participated in a series A funding round for FTX US valuing that company at $8 billion.22 \n
FTX Exchange was not regulated in the United States. U.S.-based traders could only access partner entity FTX US.7
Celebrity Affiliations
As part of their marketing efforts, the parent companies of FTX and FTX US in September 2021 signed Golden State Warriors point guard Stephen Curry to a long-term promotional partnership, providing the NBA star an equity stake in FTX.23
In August 2021, the same companies announced a long-term promotional partnership with venture capitalist and television personality Kevin O'Leary providing the "Shark Tank" host equity stakes in FTX and FTX US along with pay in cryptocurrency.24
Per FTX's website, the company "is proud to partner with the world's most exciting teams, properties, and heroes of their trade to amplify crypto education, involvement, and community impact". As of September 2022, additional partnerships included Major League Baseball, FTX Arena and the Miami Heat, Shaquille O'Neal, and FTX Field (University of California-Berkeley).25
Pros and Cons of FTX Exchange
Advantages of FTX Exchange
FTX offered reasonable trading fees compared to other cryptocurrency exchanges. The exchange also boasted its mobile app, advanced trading opportunities, and trading opportunities for hundreds of different coins or tokens.26
FTX had several incentives as part of its VIP Program based on exchange volume. For example, entities classified as VIP 1 (with a total volume of 0.1% of exchange volume) had taker fees of 0.0375%. This could improve to VIP7 (with a total volume of 2.5% of exchange volume) which reduced taker fees to 0.025%. A similar tier system existed for market makers.27
In addition, there were further benefits when these entities hold FTT. Holding $10,000 worth of FTT yielded a 15% discount on fees, while holding $100,000 of FTT yields a discount of 25%.
FTX offered users a unique affiliate link. When new users signed up using that affiliate link, the referring user received between 25% and 40% of the new user's fees depending on the amount of FTT staked. In addition, they got 5% of their fees back. FTX reserved the right to reward users with additional compensation based on the number of referrals, volume generated by users, or other criteria.28 \n
Disadvantages of FTX Exchange
Even at its height, there were several potential downsides to the exchange. FTX encouraged its users to ask for help using support tickets; for those preferring more direct contact such as live chat support, other exchanges may be more suitable. In addition, the FTX global platform could not be used by U.S. residents. Instead, residents of the U.S. used FTX US for regulatory reasons.
Though FTX offered a great range of trading products, some beginners in the space may find the interface or options overwhelming. FTX was often considered a leading option for more experienced traders, while it may have been less suitable for beginners. Though FTX boasted low trading fees, there were often lower fees to be had on other exchanges.29
What Did FTX Do?
FTX was a cryptocurrency exchange that promotes the liquidity and transacting of coins and tokens. FTX allowed users to connect their wallets, place trades, exchange digital currencies, enter into derivative contracts, or buy/sell NFTs.
Why Is FTX Not Allowed in the United States?
FTX did not permit residents of the United States to trade on its platform. This was in response to strict regulation for the cryptocurrency industry. Most recently, in August 2022, the FDIC served FTX US a cease and desist letter to FTX citing the company potentially having made false and misleading statements in violation of the FDIC Act.30
The Bottom Line
FTX was a widely-known and heavily-used cryptocurrency exchange allowing users to buy, sell, and enter into derivative contracts for coins and tokens. FTX also promoted transactions for NFT and collectibles. Though not available to U.S. residents due to cryptocurrency regulation, the company provided an opportunity for traders around the world to exchange hundreds of digital currencies for relatively low fees, until it went bankrupt, got hacked, the CEO stepped down and got sued, and investigations began into the exchange as a Ponzi scheme.
THE MAIN DAY OF CRYPTO MARKET CRASH WAS BETWEEN 25TH OCTOBER -8TH NOVEMBER.
This dashboard is analyzed on the basis of collapse day (8,9,10 November),before collapse day (15 days before 8th November) & after collapse days(10th November onwards).
\n
\n
WHAT IS DEX ?
A decentralized exchange (DEX) is a digital currency exchange that allows users to buy crypto through direct, peer-to-peer cryptocurrency transactions, all over a secure online platform without an intermediary.
DEXs were created to remove the requirement for any authority to oversee and authorize trades performed within a specific exchange. Decentralized exchanges allow for peer-to-peer (P2P) trading of cryptocurrencies. Peer-to-peer refers to a marketplace that links buyers and sellers of cryptocurrencies. They are usually non-custodial, which means users keep control of their wallet's private keys. DEX aggregators and wallet extensions fueled the growth of decentralized platforms by optimizing token prices, swap fees and slippage, all while offering a better rate for users.
Decentralized exchanges rely on smart contracts to allow traders to execute orders without an intermediary. On the other hand, centralized exchanges are managed by a centralized organization such as a bank.
What is Uniswap?
Uniswap is a decentralized cryptocurrency exchange which uses a decentralized network protocol. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts.
It was one of the first decentralized finance (or DeFi) applications to gain significant traction on Ethereum — launching in November 2018. Since then, numerous other decentralized exchanges have launched (including Curve, SushiSwap, and Balancer), but Uniswap is currently the most popular by a significant margin.
WHAT IS OPTIMISM
Optimism is a fast, stable, and scalable L2 blockchain built by Ethereum developers, for Ethereum developers. Built as a minimal extension to existing Ethereum software, Optimism’s EVM-equivalent architecture scales your Ethereum apps without surprises. If it works on Ethereum, it works on Optimism at a fraction of the cost.
OSMOSIS
What is Osmosis?
Established in 2021, Osmosis is a multi-chain AMM built for the Cosmos ecosystem. The DEX offers interoperability between blockchains using Inter-blockchain Communication Protocol (IBC) and Axelar, which facilitate the connection of blockchains within a decentralized infrastructure.Osmosis is a fully-customizable AMM that allows developers to build truly unique liquidity pools, and build and deploy custom AMMs that can quickly adjust to changing market conditions. by David ShuttleworthMarch 18, 2022. Posted on March 18, 2022
ETHEREUM
What is Ethereum?
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. Ethereum was conceived in 2013 by programmer Vitalik Buterin.
DEXs Activity on Chains (Ethereum, Arbitrum, Optimism, Osmosis)
METHOD
In this dashboard we are going to observe the activities over DEX during the FTX collapse.
For this I have divided the activities in three different stages on the basis of timespan - before/ pre FTX collapse, same day of collapse and after/post collapse days.
This timespans are used to compare and analyse activities over DEX. In the first part of the Dashboard I have analyse the activities on DEX exchange on 4 chains ( Osmosis,Ethereum,Optism & Arbitrum).
Dim Labels Tables are used to create this dashboard for address. We have analyse these chains on mentioned timespan.
In second part we have analyzed the activity on Uniswap on Ethereum ,Orca on Solana for analyzing the activity over Uniswap, ethereum.uniswap.ez_swaps are useFor analyzing the activities over Orca solana.core.fact_swaps are used.d.
For Velodrome I have used optimism.velodrome.ez_swaps table.
Stable coins swap activities are being used on DEX during FTX collapse to check whether users are selling or buying tokens in the dip because of panic selling.
At the end we have analyzed the swaps of users from CEX ( Out flowers) to DEX for a safer platform.
ANALYSIS
According to these charts we observe that there are more new first time user registered in DEX before the collapse time than compared to the days after the crisis We also observe the activity before collapse timespan on DEX were much higher than the activity after the collapse and during the collapse .
Analysis
DEX has decreased remarkably after FTX collapse .According to the chart displayed , on the crisis day we observe high activity of user on DEX but after some time the count of active users ,number pf transaction has faced downfall over time.
We cannot see any6 significant number of ne first time users on dex during the ftx collapse .Obviously we do not notice any trend of new users on DEX before and after collapse timespan.
At the end we can say OSMOSIS is the least affected chain (among ETHEREUM, ARBITRUM,OPTIMISM ,OSMOSIS)by FTX collapse.
ORCA
ORCA is an Automated Market Maker (AMM) based decentralized exchange (DEX) built on top of the Solana blockchain.
Taking full advantage of Solana’s quick transactions and low fees, Orca was among the first AMMs launched on the Proof of Stake (PoS) platform. With its intuitive interface, Orca offers a user-friendly place to exchange cryptocurrencies on Solana.
Orca functions by offering participants a way to swap tokens and earn a share of trading fees via the platform’s trading pools, known as aquafarms. This approach to pooling asset liquidity which can then be used for trading was first popularized by decentralized exchanges on the Ethereum network such as Uniswap. While the basic functions of Orca may seem similar to other exchanges found within the Solana ecosystem, a few key features set this AMM apart from its closest competitors.
\n
ANALYSIS
Solana ecosystem has been affected the most by FTX crush. We can see a downfall in volume of swap in ORCA after the collapse timespan .ORCA has faced highest number and volume of swaps and also active swappers during the same day of collapse,
but after the date, we can see a downfall in swap activity in DEX as time goes on. This is remarkable that even after such a bad condition of ORCA there are more new first time user in the platform compared to pre collapse day.
\
ANALYSIS
We can see that the highest share of swaps to stable coins, in terms of volume, during the same day of collapse and this can be due to panic sellers.
in spite of DEX that had highest number of swaps from stable coin , on ORCA. we can see that share of swaps to stable coins, ( Assets being sold) is more than swaps from stable coins and this share is increasing more and more with passing time.
At the end we may conclude the majority of ORCA swappers were more brave users who have sold there assets ( to stable coins) in order to escape loosing money and there are lower number of traders who have purchased tokens in the dip after their price reduced.
UNISWAP
What is Uniswap?
Uniswap is a decentralized cryptocurrency exchange which uses a decentralized network protocol. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts.
It was one of the first decentralized finance (or DeFi) applications to gain significant traction on Ethereum — launching in November 2018. Since then, numerous other decentralized exchanges have launched (including Curve, SushiSwap, and Balancer), but Uniswap is currently the most popular by a significant margin.
ANALYSIS
We can see swap activity very high and swap volume also on uniswap during the same day of FTX collapse.
It is visible that DEX activity after collapse timespan has not decreased remarkably compared to the days before this & this means users still believe in this platformand keep trading in it.
But volume wise we can see decreasing trend of swaps volume over timewith sudden small spikes in between .
At last we can say that almost increasing number of new first-time swappers on this DEX as time passes on especially during end of November. The reason behind this might be that people are moving from CENTRALIZED EXCHANGE TO DECENTRALIZED EXCHANGE as a safer platform
ANALYSIS
Based on above charts main collapse was the most active day on uniswap & the highest daily average number and especially average volume of swaps has achieved during this period .The number of swaps and swappers are not affected much but average volume of swaps has decreased after the collapse timespan.
ANALYSIS
On the above chart we do not observe any significant change in a specific volume- type swaps after and during the swaps main day of collapse. There are low volume swaps after the collapse the reason behind this might have been that many tokens have lost their $ USD value during the crash period of market .Users might have performed swaps with lower volume for precaution
ANALYSIS
Based on above charts, in maximum cases the number and volume of swaps from stablecoins to the other asset was more than swaps to stablecoins .
During the same day of collapse ,we observe slightly increase share of number of swaps from stable coins to the other asset.
the share of swaps from stablecoin has increased significantly in volume after the collapse timespan .We observe high increase of swaps to stablecoin on November 12th. The reason behind this increase might be some users have swapped their asset to stablecoins after attaining a remarkable profit from token price recovery after collapse .
We can end by saying that maximum uniswap traders did not panic during FTX collapse & have swapped their stable coins to other asset that lost a significant amount of their value due to market crash .So these swappers were trying to buy assets in the dip instead of being a panic seller by selling their own asset & escape from market as losers.
CONCLUSION
DEX has visualized many activities before the crisis day, but as time passed, DEX has reduced to it’s earlier crash amount.
Ethereum and many others are gaining market. People have started moving their asset to secured and trustable block chain. so that they don’t face the downfall again.
The number’s of new user’s during the FTX collapse are few, there was no remarkable trend in the market for increase or reduce number of new users joining DEX after or before collapse of FTX.
CREDITS TO ALI3N#8546
VELODROME FINANCE(OPTIMISM CHAIN)
WHAT IS VELODROME?
Velodrome Finance is the liquidity base layer for the entire Optimism ecosystem. Launched in June 2022, it focuses on properly incentivizing liquidity for DeFi protocols. Interestingly, Velodrome is built on the foundation put in place by Solidly.
Velodrome Finance, at its core, is a solution for protocols on Optimism to properly incentivize liquidity for their own use cases.
ANALYSIS
Similar to the Uniswap, on Velodrome too, we can see high spikes of increasing swap activity especially in terms of volume during the main days of the collapse.
despite Uniswap, we can see Velodrome was more negatively affected by the FTX collapse during the days after the crisis and its activity and number of active swappers has decreased slightly.
But, we can see almost increasing number of new first-time swappers on this DEX as time goes on and maybe these are people who have left centralized exchanges and are migrating to this decentralized exchange as a safer platform.
ANALYSIS ON CEX OUTFLOWERS
On the left charts, we can see that activity of CEX outflowers (Optimism Wallets) on Velodrome has increased significantly over time and the number of swaps and also swappers is increasing more and more over time. this shows that these users are leaving CEXs and performing more transactions on DEXs as safer platforms.
ANALYSIS ON STABLECOIN DAILY % WISE SHARE
And on the above charts, we do not see a significant change in stablecoins’ swap behavior during these 3 different timespans.
Anyway, in terms of volume, we can see some high spikes of swaps from stablecoins during the main day of collapse and also 18th November and this shows similar to the Uniswap, Velodrome traders are also buying tokens in the dip after their lost value.
Add Text Here