- The collapse of SVB and other banks prompted users to turn to DEXs.
- The recent bank failures threaten liquidity between fiat and crypto.
- Crypto users turned to DEXs like Curve Finance and Uniswap to acquire other assets amidst the chaos.
The recent collapse of three crypto-friendly banks, including SVB, has made investors nervous over their ability to cash out of the market. The de-banking of crypto could have serious implications for the industry. To tackle that issue, investors flocked to decentralized exchanges (DEXs).
A report by Chainalysis looked at the collapse of Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank. The report, published on Tuesday, said that the bank failures have significant implications for the cryptocurrency industry.
Crypto Traders Ditch CEX for DEXs After SVB Crash
Silvergate and Signature had among the largest pool of clients in the crypto space. Their collapse could make it harder for crypto businesses to enable crypto-to-fiat transactions. As USDC lost its peg amid the SVB crisis, crypto panicked.
On-chain data showed that crypto investors withdrew billions in holdings from centralized exchanges (CEXs), flocking to DEXs.
Hourly outflows from centralized exchanges spiked to $1.2 billion at 1 am on March 11, Chainalysis writes. USDC and wrapped Ether (wETH) saw some of the biggest trading volumes to DEXs at this time.
Traders used DEXs like Curve Finance and Uniswap to acquire other assets after USDC’s depegging. The exchanges saw a spike in users buying stablecoins like USDT and DAI.
With further bank crises looming, liquidity in crypto markets could be lower. This is especially true after the collapse of two major crypto banks.
Chainalisys suggests investors should look at over-the-counter (OTC) trading platforms. These platforms execute large cash-for-crypto trades, which could show how big an impact the crisis had on crypto.
On the Flipside
- Crypto-friendly banks are not the only ones that saw trouble. Recently, Credit Suisse, one of the largest banks in the world, asked for a $54 billion loan to avert a liquidity crisis.
- Increased adoption of DEXs could drive further innovation and development in the decentralized finance (DeFi) sector.
Why You Should Care
The bank failures underline the fragility of traditional financial systems and the potential benefits of decentralized alternatives.
Read about how crypto could be a solution to the banking crisis in the future:
Can Crypto Be the Answer to the U.S. Banking Crash as Bank Runs Continue?
Read about the latest panic in one of the biggest global banks, and what it means for crypto:
Credit Suisse Panic: Key Takeaways for Crypto