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Crypto users take refuge in DEXs after the fall of SVB

After the collapse of Silicon Valley Bank, history repeated itself, users took refuge in decentralized exchanges (DEXs). After concerns of losing money or access to it, crypto users take refuge in DEXs after the fall of SVB, this time.

Concerns about centralization, stablecoins and also regulatory instability are once again plaguing crypto users. Another relevant factor for this was the Circle’s exposure against SVB, as this caused the loss of USDC peg.

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Crypto users take refuge in DEXs after the fall of SVB

2023 does not stop giving us bad news and once again, centralized exchanges see pronounced outflows after the uncertainty. The fall of Silicon Valley Bank unleashed a regulatory maelstrom that threatens to make the path of centralized exchanges more difficult.

After an unexpected turn, crypto users take refuge in DEXs after the fall of SVB and the depeg of USDC that threatened the second big stablecoin. A post from crypto analytics firm Chainalysis demonstrated the outflow from centralized exchanges.

Especially on March 11, after the declaration by the California regulatory authorities, around $300 million moved from CEX to DEX in a single day.

Similar behavior occurred after the fall of FTX and the refuge of crypto users in self-custody and decentralized exchanges. The fear that the contagion would spread to other crypto companies is similar to the fear that banks currently suffer. However, analytics firm Token Terminal suggests that this preference is usually short-lived as the tide is still high.

Crypto users take refuge in DEXs
DEX trading volume from September to March. Source: Terminal Token

Another prominent factor was the drop in USDC, which forced several large exchanges to stop trading, including Coinbase and Binance. This came after it was clarified that Circle had an SVB exposure of $3.3bn. That forced CEXs to halt USDC trading suddenly for a couple of hours.

Blame it on USDC

We must always look for a culprit, what happened is not a series of isolated and fortuitous events. In this case, USDC is to blame. After the fall of SVB, crypto users take refuge in DEX and many of them acquired large amounts of USDC after the depeg suffered by the stablecoin.

Crypto users take refuge in DEXs
Most Acquired Tokens During the USDC Crisis

Regarding this, the analysis firm stated the following: “Several assets saw large spikes in user acquisition, but none more than USDC.” This is not a coincidence, many users panicked, lost huge amounts and others profited hugely.

Many of the users, after fleeing from CEX to DEX respectively, chose to buy USDC betting on a rally. This bet by many users after the loss of parity, specifically on March 11, guaranteed them a juicy slice after the USDC parity recovery on March 13.

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