The collapse of Silicon Valley Bank (SVB) sent shockwaves throughout the crypto world this week. But while the news triggered volatility in centralized exchanges and left investors living in fear, the decentralized exchanges have seen a surge in trading activity. In just a few days, the daily trading volume on decentralized exchanges skyrocketed by a staggering 255.36%, according to DeFiLlama data. This is the highest amount since November 2022, when the figure was hovering close to $60 billion.
The incident that precipitated the surge in trading activity was related to USD Coin (USDC), the second-largest stablecoin, which lost its peg to the dollar due to the impacts of the banking crisis. In a flurry of panic, investors rushed to decentralized exchanges in order to move their money around. Uniswap became the most active hub, reaching their highest daily volume ever of $11.84 billion on March 11th. Other decentralized protocols, such as Curve Finance, also registered impressive activity, with the exchange’s largest daily trading volume to date of almost $8 billion.
The trend of investors turning to DeFi projects in times of major collapses is becoming more apparent. This was first observed last year when the market took a turn from bull to bear and centralized projects saw a decrease in funding, while decentralized entities enjoyed renewed support. There’s also been an increase in leveraged positions, with roughly $70 million being at risk of liquidation.
One of the most attractive benefits of decentralized exchanges is the lack of middlemen and the presence of smart contracts providing financial services. Thanks to this, investors are able to make decisions free of external control, arbitrage opportunities are open, and transactions are completed faster. However, with great power comes great responsibility, and traders should research their options carefully before taking any actions.
It remains to be seen whether or not the traditional exchanges will be able to regain the faith of investors after the collapse of Silicon Valley Bank’s. What we do know, however, is that decentralized exchanges have demonstrated remarkable resilience in the face of adversity and will likely continue to be one of the main players of the industry.