Defichain Co-Founder: FTX's Collapse Has Rekindled Interest in Defi and Associated Products
According to Julian Hosp, co-founder of the decentralized finance entity Defichain, the fall of the crypto exchange FTX and the domino effect it has had may have rekindled interest in decentralized finance (defi) and associated products. Hosp, however, conceded that the crypto exchange’s dramatic collapse also encourages regulators to adopt a harder line when dealing with crypto entities.
Decentralized Finance Takes Center Stage
While the massive failure of crypto exchange FTX and the chaos that followed is likely to embolden hardline regulators, experts like Julian Hosp of Defichain believe the ensuing loss of trust in centralized institutions will likely rekindle user interest in decentralized finance (defi) and associated products. For users who still believe in cryptocurrency’s value proposition — a viable alternative to centralized finance — Hosp said such individuals are likely to switch to self-custody.
As reported by Bitcoin.com News, many users — seemingly spooked by the sheer scale of FTX’s misuse of client funds — have been removing their assets from centralized crypto exchanges. In some cases, the unusually high volumes of withdrawal requests have seen exchange platforms (including FTX before its collapse) struggle or fail to process these in time.
In contrast, defi platforms like Uniswap and Defichain have seen their respective traded volumes spike in the same period. To illustrate, Uniswap posted a tweet on Nov. 14 which indicated that the number of active daily wallets on the defi platform had increased to 55,550, a new record. The tweet could suggest that Hosp and other crypto experts’ prediction is already turning out to be correct.
New users of Uniswap’s Web App reached a 2022 high.
Self-custody and transparency are in demand and users are flocking to what they know and trust.
Let’s keep building. pic.twitter.com/IwPqTmx58J
— Uniswap Labs 🦄 (@Uniswap) November 14, 2022
Meanwhile, in a written response to questions from Bitcoin.com News, Hosp noted that the ongoing FTX-related events have succeeded in deterring prospective users.
“Trust is shaken at the moment. While existing crypto users are more likely to move to self-custody and into Defi, new investors will wait on the sidelines until the dust has completely settled, which may take a little while,” Hosp explained.
Going forward, Hosp, who co-founded Defichain with U-Zyn Chua, said he expects to see “a downward price movement over the coming months.” According to Hosp, this trend will only be reversed “once everything has healed.”
Domino Effect of the FTX Crash
While the crypto market weathered many storms before this one, some crypto experts have warned that FTX’s demise could yet trigger a much bigger ecosystem-wide crash. They point to reports of users on some exchange platforms encountering problems when attempting to withdraw. When asked if such a crash can be averted, Hosp said this will depend mainly on the extent of the secondary consequences of the FTX/Alameda fallout.
“This is very difficult to gauge right now. If the effects are relatively small, affected platforms can either find a remedy themselves (as the recent Huobi announcement of an 18 mil USD hole shows) or other players such as Binance can step in. However, if it starts to be like a crazy wildfire, we can only brace for impact,” Hosp said.
Like his peers, Hosp said he believes the fallout from the FTX saga emboldens regulators and gives them a reason for cracking down on the crypto industry.
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