Crypto Users Turned to DEXs, Loaded up on USDC after Silicon Valley Bank Crash
With the failure of Silicon Valley Bank, investors loaded their bags with USD Coin $1.00, resulting in a fund flight from controlled exchanges (CEXs) to decentralized exchanges (DEXs). Outflows from centralized exchanges frequently surge when markets are volatile, according to blockchain analysis firm Chainalysis in a March 16 blog post, since customers are likely concerned about losing access to their cash if exchanges fail.
According to Chainalysis data, hourly outflows from CEXs to DEXs peaked at more over $300 million on March 11, shortly after SVB was shut down by a California regulator.
At the collapse of cryptocurrency exchange FTX last year, a similar behavior was witnessed, raising concerns that the contagion may spread to other crypto businesses. Data from the blockchain analytics platform Token Terminal, however, reveals that the increase in daily trading volumes for big DEXs was only temporary in both situations.
USDC was recognized as one of the top assets moving to DEXs, which Chainalysis claimed was predictable given that USDC depegged after stablecoin issuer Circle said it had $3.3 billion in reserves blocked on SVB, leading major CEXs such as Coinbase to temporarily cease USDC trade.
Chainalysis was surprised by the growth of USDC acquisitions on prominent DEXs like Curve3pool and Uniswap. “Many assets witnessed significant increases in user acquisition, but none more so than USDC,” the blockchain research group noted.
Chainalysis hypothesized that this was due to faith in the stablecoin, with some crypto users stockpiling USDC while it was still relatively cheap, wagering that it will reclaim its peg — which it did, according to CoinMarketCap, on March 13.