Following the Chinese ban, investors are transferring capital to DEX

Capital from investors is transferred to decentralized exchanges such as Uniswap and the DeFi ecosystem. In the last few months, there have been significant developments in China, which have shaken the crypto market and global financial markets. China’s Evergrande debt debt crisis has triggered shock waves in global stock markets. Subsequently, China tightened regulation of cryptocurrencies.

Although the situation with Evergrande has been resolved a bit, the government’s crackdown on unregulated DeFi platforms and stablecoin transactions continues. As a result, the layer-1 and layer-2 protocols record an increased volume because traders are looking for a centralized refuge.

According to CryptoQuant CEO Ki Young Ju, after China announced a ban on all cryptocurrency transactions, large cryptoexchanges, such as Huobi, suspended services for accounts in China. The funds were eventually deposited on decentralized exchanges (DEX) and in the decentralized finance ecosystem (DeFi).

It seems Huobi users moved $ ETH, #stablecoins, and DEX tokens to decentralized exchanges like Uniswap.

Outflow transactions spiked after Huobi announced the suspension of existing accounts in mainland China.

Ironically, regulation led to decentralization this time. pic.twitter.com/EKpkHIdSv0

– Ki Young Ju 주기영 (@ki_young_ju) September 29, 2021

This phenomenon is particularly interesting and requires further investigation for the presumed failure of Ethereum hard fork London.

The dominant DEX is still Uniswap

According to Dune Analytics, the ETH network is by far the most dominant network in the field of smart contracts. It hosts the largest and most used decentralized exchanges such as Uniswap (UNI) and SushiSwap (SUSHI).

Monthly volumes of DEX. Source: Dune Analytics

The latest ban on cryptocurrencies from China dominated by the headline in the last two weeks of September. However, it was originally announced on September 3, about the same time as activity on Uniswap increased.

Uniswap trading volume vs. total revenues. Source: Token Terminal

As shown in the chart above, the increase in activity and trading volume on Uniswap actually started on 28 August and remained above its previous average for several weeks.

Uniswap has also benefited from recent integrations with the newly released Layer 2 solutions Optimism and Arbitrum, which have helped reduce transaction costs and speed up confirmation times for network users.