New Restrictions In China Caused Increase In DeFi

By Aleksandra Wilson
3 min read October 5, 2021

In the last few days, since China banned all transactions in crypto, there has been an increase in DeFi. Many protocols have been surpassing their average volume of trading; some even exceed centralized exchanges. For example, the price of DYDX, a decentralized exchange token, has increased by 35.9%. It got its highest price ever, $22.17, according to reports. Coinbase, the largest centralized exchange in the US, was also surpassed by the volumes of trading of the protocol.

Different from centralized exchanges, smart contracts are what DEXes mainly rely on. These are parts of code that execute automatically under pre-established circumstances . By doing this, DEXes enables users to trade crypto without a middle man. 

Antonio Juliano’s Statement

Last Sunday, the founder of dYdX, who was also an employee at Coinbase, made a statement on Twitter. In his post, he said that he was humbled and blown away by the growth that recently took place. He also pointed out that this is the first time that Coinbase was outperformed by dYdX.

After Juliano posted the tweet, there was an increase in DeFi, the volumes of trading at dYdX got even higher. It overpassed the $3 billion mark on spot markets and $6.3 billion in derivatives. At Coinbase, the trading volumes were at $3 billion in the last 24 hours. Present times look promising for other primary DEX tokens. Such is the case of SushiSwap (SUSHI) and Uniswap (UNI), which have recorded rising gains of 29% and 36%, respectively.

Chinese Investors Looking For New Alternatives

The increase in DeFi, particularly in the price of DEX tokens can be explained by the news China gave just a few days ago. The government of said country implemented new restrictions that had a significant impact on the crypto industry. Last Sunday, there was evidence on Twitter that Chinese traders are looking for new ways to make money. The most logical option for most of them is the DeFi space. There are also predictions that a significant amount of Chinese users will move into the decentralized finance world. Therefore, dYdX and MetaMask are expected to increase their number of users exponentially.

The New Restrictions

It was only last Friday when the PBoC (People’s Bank of China) released a list of newly forbidden activities related to crypto. Issuing tokens and trading were among said activities, therefore the increase in DeFi. They also banned exchanges outside of China to provide services to the local investors. Because of this, a couple of leading crypto exchanges (when it comes to the volume of transactions) already stopped registrations for new customers in China. These companies are already implementing their plans of cleaning up the accounts that already exist. The plan is  to get all this done by the end of 2021.

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