Last week, the repression of cryptocurrency trading in China shocked the entire market: after the announcement, the prices of bitcoins and altcoins fell sharply, but like all cryptocurrencies, the market has recovered, as traders discovered. Flexors are another way to participate in the market.
Part of China’s goal of limiting citizens’ ability to trade cryptocurrencies seems to be focused on preventing the use of cryptocurrencies and the growing decentralized financial system (DeFi), but such maneuvers appear to have the opposite effect, such as the price of the token and protocol activity of projects such as Uniswap (UNI) and dYdX has increased somewhat since the start of the campaign.
There was a significant amount of regional bitcoin (BTC) flows in East Asia, according to Chainalysis, as shown by the long orange line in the chart below. This indicates that holders of cryptocurrencies in the region are changing their assets in response to tough regulation.
Regional flows of BTC. Source: Chainalysis
As Chainalysis says, “Assets tend to move within a region, probably due to the preferences of local stock exchanges, but flows between regions often occur as a result of regulatory issues, geopolitical changes, or significant changes in market prices.”
The lack of inflows from East Asia, combined with suspended services for crypto exchanges such as Huobi and Binance for Chinese residents, indicates that funds are retained in the region and not on central exchanges.
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Benefits of the DeFi ecosystem
At the same time as this increased movement took place in the East Asia region, activity on decentralized exchanges such as Uniswap and dYdX decentralized derivatives exchanges grew as Chinese traders sought a safe haven for their cryptocurrency activities.
Uniswap trading volume versus total revenue. Source: Token Terminal
DydX is a particularly useful data point because it is currently the most widely used decentralized derivatives exchange and sees strong demand after regulators from around the world have thrown a hammer at centralized exchanges with free KYC guidelines offering derivative services.
According to Token Terminal, dYdX has been in the top 5 over the past week in several categories, including token price growth, total protocol revenue, fees paid, price-to-sales ratio and price-to-earnings ratio. The stock exchange also came in among the top six when it comes to increasing the total closed value (TVL).