2 Reasons Why DeFi Can Go Mainstream

Key Insights

• FTX collapse could open a new frontier for traders to adopt DeFi
• The FTX and other CEX collapse has led to the wipeout of about 1.2 million BTC 
• The switch to a non-custodial wallet will have a positive impact on DeFi trading volumes 

Industry players are looking towards Decentralized Finance (DeFi) since the FTX bankruptcy and eventual collapse. Significantly, the recent FTX collapse alongside other centralized platforms has made investors find solace in non-custodial platforms. 

As investors and partners of FTX are still counting their losses— industry players and experts are faced with how safe these exchanges are. Similarly, the FTX collapse raises the question of the centralized decision-making system of these exchanges without checks. 

While investors assert that the collapse can not deter them from crypto investments, experts say the tech can go mainstream— as investors consider it a viable alternative. 

Mainstream DeFi Adoption as Response to FTX Collapse

Before the FTX collapse, the exchange held one billion in customers’ funds. Investigations showed that the exchange was using customer-deposited crypto assets to mitigate losses. 

In the wake of the FTX collapse, several reports have shown how much was lost and the overall impact. A recent report showed FTX, alongside other crypto exchanges, has taken about 1.2 million Bitcoin out of circulation. 

Similarly, another report showed that exchange outflows rose to 106,000 BTC per month, with investors diving into DeFi platforms. Those who used to have their funds in centralized exchanges have turned to noncustodial options to trade funds. 

For instance, on 11 November— the day FTX filed for bankruptcy — Uniswap recorded a significant spike in its trading volume. Similarly, Uniswap registered more than one billion dollars in 24-hour trading volume. 

Experts Remain Confident of Mainstream DeFi Adoption

Experts and industry players have responded to the likelihood of DeFi growing in trading volume. For instance, Bernd Stockl, Palmswap co-founder, said its protocols have seen an increased bump in trading volumes. He said,

Its usage will surely rise, thanks to the FTX downfall.” 

Similarly, Bernd Stockl said,

With so many centralized exchanges falling, trust in custodial wallets is very low— and more users will surely adopt the advantages of DeFi.” 

Furthermore, Elle Azzi, the Co-founder of VALK, said the longer-term trend of the tech approaches. He said the increase in DEX volumes could be the beginning of a longer-term trend— due to the general reluctance of Centralized exchanges traders. 

Significantly, Elle Azzi mentioned the innovations and usability of the tech as reasons that could contribute to its mainstream adoption. He said,

The trend is that DEX is developing the usability and User-interface of centralized exchanges.” 

Conclusively, the FTX collapse has eroded investors’ confidence in Centralized exchanges. The implication is that DeFi will witness increased adoption and mainstream usage in the ecosystem. 

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