Crypto Investors Transferred Funds From CEXs to DEXs after SVB Failure
Investors responded to the failure of Silicon Valley Bank by moving their money into USDC and transferring funds from centralized exchanges to decentralized exchanges.
Chainalysis, a blockchain analysis firm, noted in a blog post from March 16 that when the markets are chaotic, withdrawals from centralized exchanges tend to increase as users fear losing access to their money if the exchanges fail.
The Chainalysis figures indicate that within one hour, the amount of funds transferring from CEXs to DEXs increased sharply to more than $300 million on March 11, shortly after SVB was closed down by a California governing body.
Last year, a similar event occurred when the FTX cryptocurrency exchange crashed, causing worries that other crypto businesses could be affected by the fallout.
However, analysis from the blockchain analytics platform Token Terminal indicates that the daily trading volumes for major DEXs increased quickly but did not last long.
Chainalysis reported that USDC was one of the most frequently transferred assets to DEXs, which wasn’t surprising given that Circle had $3.3 billion in reserves stuck on SVB, leading to Coinbase and other CEXs suspending USDC trading for a time.
Chainalysis observed a sharp rise in the acquisition of USDC on prominent decentralized exchanges like Curve3pool and Uniswap, which was particularly remarkable. They commented that “Of all the assets, USDC had the most substantial growth in user acquisition.”
Chainalysis speculated that this was caused by the trust people had in the stablecoin, leading some crypto users to purchase USDC when it was inexpensive and predicting that it would go back to its peg — which occurred on March 13 as reported by CoinMarketCap.