The collapse of the now-bankrupt cryptocurrency exchange FTX has raised many concerns over unregulated centralized platforms.
Investors are now coming to question how safe it is to keep one’s funds on these exchanges and have voiced grave concerns about centralized decision-making without any checks.
FTX held one billion in a customer’s fund and was found to be using the customer-deposited crypto assets to mitigate its own business losses.
Furthermore, a recent report suggests that the downfall of numerous crypto exchanges over the last decade has permanently taken 1.2 million Bitcoin (BTC) — almost 6% of all Bitcoin — out of circulation.
The revelation of unethical practices by FTX in its bankruptcy filing has set a panic among investors who are already losing trust in these centralized trading firms. Exchange outflows hit historic highs of 106,000 BTC per month in the wake of the FTX fiasco and the loss of trust in centralized exchanges (CEXs) has pushed investors toward self-custody and decentralized finance (DeFi) platforms.
Users have pulled money from crypto exchanges and turned to noncustodial options to trade funds. Uniswap, one of the largest decentralized exchanges (DEX) in the ecosystem registered a significant spike in trading volume on Nov. 11, the day FTX filed for bankruptcy.
With FTX’s implosion acting as a catalyst, DEX trading has seen a notable increase in volume. Just last week, Uniswap registered over a billion dollars in 24-hour trading volume, much higher than many centralized exchanges in the same time frame.
Aishwary Gupta, DeFi chief of staff at Polygon, told Cointelegraph that the failure of centralized entities like FTX has definitely reminded users about the importance of DeFi:
“DeFi-centric platforms simply cannot fall victim to shady business practices because ‘code is law’ for them. Clearly, users realize it as well. In the wake of the FTX implosion, Uniswap flipped Coinbase to become the second-largest platform for trading Ethereum after Binance. As decentralized platforms are run by auditable and transparent smart contracts instead of people, there is simply no way for corruption or mismanagement to enter the equation.”
According to data from Token Terminal, the daily trading volume of perpetual exchanges reached $5 billion, which is the highest daily trading volume since the Terra meltdown in May 2022.
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