DEXs Season
With the collapse of FTX, do users want to remove their crypto from centralized exchanges and use decentralized options for trading?
What is Decentralized Exchange (DEX)?
Decentralized exchanges, also known as DEXs, are peer-to-peer marketplaces where cryptocurrency traders make transactions directly without handing over the management of their funds to an intermediary or custodian. These transactions are facilitated through the use of self-executing agreements written in code called smart contracts.
DEXs were created to remove the requirement for any authority to oversee and authorize trades performed within a specific exchange. Decentralized exchanges allow for peer-to-peer (P2P) trading of cryptocurrencies. Peer-to-peer refers to a marketplace that links buyers and sellers of cryptocurrencies. They are usually non-custodial, which means users keep control of their wallet's private keys. A private key is a type of advanced encryption that enables users to access their cryptocurrencies. Users can immediately access their crypto balances after logging into the DEX with their private key. They will not be required to submit any personal information like names and addresses, which is great for individuals who cherish their privacy.
Innovations that solved liquidity-related problems such as automated market makers helped attract users to the decentralized finance (DeFi) space and largely contributed to its growth. DEX aggregators and wallet extensions fueled the growth of decentralized platforms by optimizing token prices, swap fees and slippage, all while offering a better rate for users.
Decentralized exchanges rely on smart contracts to allow traders to execute orders without an intermediary. On the other hand, centralized exchanges are managed by a centralized organization such as a bank that is otherwise involved in financial services looking to make a profit.
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What is Uniswap?
Uniswap is a decentralized cryptocurrency exchange which uses a decentralized network protocol. Uniswap is also the name of the company that initially built the Uniswap protocol. The protocol facilitates automated transactions between cryptocurrency tokens on the Ethereum blockchain through the use of smart contracts.
Uniswap was one of the first decentralized finance (or DeFi) applications to gain significant traction on Ethereum — launching in November 2018. Since then, numerous other decentralized exchanges have launched (including Curve, SushiSwap, and Balancer), but Uniswap is currently the most popular by a significant margin.
What is Velodrome Finance?
Velodrome Finance is the liquidity base layer for the entire Optimism ecosystem. Launched in June 2022, it focuses on properly incentivizing liquidity for DeFi protocols. Interestingly, Velodrome is built on the foundation put in place by Solidly.
Velodrome Finance, at its core, is a solution for protocols on Optimism to properly incentivize liquidity for their own use cases.
What is Orca?
Orca is an Automated Market Maker (AMM) based decentralized exchange (DEX) built on top of the Solana blockchain. Taking full advantage of Solana’s quick transactions and low fees,
Orca was among the first AMMs launched on the Proof of Stake (PoS) platform. With its intuitive interface, Orca offers a user-friendly place to exchange cryptocurrencies on Solana. Orca uses an ongoing feedback loop to listen to the concerns of users and updates its protocol around this feedback. Orca has thus created an intuitive DEX that provides a simple yet powerful experience for novice and experienced traders alike.
What is Osmosis?
Established in 2021, Osmosis is a multi-chain AMM built for the Cosmos ecosystem. The DEX offers interoperability between blockchains using Inter-blockchain Communication Protocol (IBC) and Axelar, which facilitate the connection of blockchains within a decentralized infrastructure.
Methodology
In this dashboard, We are going to analyze the activity over Decentralized Exchanges (DEXs) during the FTX collapse. For this, I have defined 3 timespans:
1- Before FTX Collapse: 2 weeks before 8th November, the main day of the cryptocurrency market crash (25 October - 8th November).
2- Main Collapse Days: 8th, 9th and 10th November.
3- After Collapse: After 10th November
I have chosen these timespans to be able to compare activity over DEXs in different time periods with the different situations of the cryptocurrency market.
Also, This dashboard has 2 parts:
1- In The first part, I analyzed the activity on decentralized exchanges on 10 chains (Ethereum, Artbirum, Optimism, Avalanche, Polygon, Solana, Osmosis, Flow, Near, and Binance Smart Chain). For this, I have extracted the contract address of decentralized exchanges from the dim_labels table (or manually used ez_swaps tables for some chains) and then analyzed the activity over mentioned timespans on these chains.
2- In the second part, I have chosen Uniswap on Ethereum, Velodrome on Optimism, Orca on Solana, and Osmosis DEX**,** to analyze the activity over them during the mentioned timespans and see how they were affected by this collapse.
For analyzing the activity over Uniswap, I have used ethereum.uniswapv3.ez_swaps. For Velodrome I have used optimism.velodrome.ez_swaps table. these 2 tables have amount_usd columns so our work is easy to extract the USD Value of swaps on them.
For analyzing the activity over Orca, I have used solana.core.fact_swaps table (filtering swap_program = ‘orca’). Since this table does not have an amount_usd column, I have calculated the USD value of tokens from their swaps with stablecoins such as USDC and USDT and then joined this price table with the swap table. (Solana fact_hourly_token_prices table does not include all tokens and also does not have a “mint” column to join it with the swap table)
For analyzing the activity over Osmosis, I have used osmosis.core.fact_swaps. similar to the Orca, this table does not have an amount_usd column too but with joining the swap table with osmosis.core.dim_prices and osmosis.core.dim_labels tables, We are able to extract the USD value of swaps.
I have also the stablecoins swap activity on these DEXs during the FTX collapse to see weather users are buying tokens in the dip (swap from stablecoins) or selling them because of panic (swap to stablecoins).
Moreover, I have analysed the swap activity by users who have withdrawn their asset from centralized exchanges (Outflowers) on these decentralized exchanges and in the last part of the dashboard, I have extracted the swap activity by CEX outflowers who have done their first-ever transactions on these DEXs for each chain (except Osmosis because its CEX wallets’ are not available on Flipside data)
In this part, I analyzed each DEX separately, and then in the last section, I analyzed overall data on them ins single charts and also analyzed their native tokens’ price during this timespan to see how they performed during the crisis.
For all parts, I have only considered successful transactions.
Also, I have excluded “Current Date” from the results because the data on today is not complete yet and may affect the analysis.
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FTX & Alameda Collapse
During the past month, The Cryptocurrency market has experienced one of its darkest days in history because of the FTX & Alameda collapse that resulted in FTX's bankruptcy and the loss of millions of dollars in assets and also dropping the price of almost all tokens (including Bitcoin that its price has been reduced to 15000 !).
This crash has impacted several platforms in the cryptocurrency market that We have analyzed some of them before (you can check them in my Flipside profile).
The FTX Crisis (As one of the largest and most famous centralized exchanges) has caused so many users to lose their trust in similar platforms and transfer-out their assets from exchanges and migrated to decentralized exchanges (DEXs) in order to be safe from possible similar crashes for other exchanges in the near future.
According to reports, FTX had been taking customer funds and giving them to Alameda Research. After a while, things turned worse as over $400 million was withdrawn from FTX. The company has blamed it on a hack, but many in the industry believe it to have been an inside job.
The company’s financial misdeeds have sparked a debate about centralized exchanges and the fact that they appear to hold many customer funds and can access them anytime.
Centralized exchanges shouldn’t do this. Customer funds should be left alone, and they should be able to withdraw their money whenever they want to. However, recent events have revealed a significant trust barrier in the crypto market. And as questions continue to arise about what FTX and its top brass were really up to in the lead-up to the bankruptcy filing, more people have advocated for investors to withdraw their funds from centralized exchanges.
Based on the above and left charts, we can again obviously see that Solana was the most affected chain by the FTX Collapse and its number of transactions and users has decreased significantly after the collapse timespan.
On the other hand, we can see that share of chains such as Ethereum and Polygon has increased slightly after the collapse.
Uniswap (Ethereum Chain)
According to the above and left charts, we can see highest spikes of swap activity and also swaps volume on Uniswap during the main days of FTX collapse.
As we see, this DEX’s activity after the collapse timespan has not decreased signifincatly compared to the days before this and this means users still have their trust in this platform and keep trading on it.
But in terms of volume, we can see decreasing trend of swaps volume over time with some sudden semi-high spikes on some days.
Moreover, can see almost increasing number of new first-time swappers on this DEX as time goes on, especially during the last days of November and maybe these are people who have left centralized exchanges and are migrating to this decentralized exchange as a safer platform.
Based on the left charts, as mentioned above, main collapse days (8th, 9th, and 10th November) were the most active days on Uniswap and the highest average daily number and esepcially average daily volume of swaps has achieved during the crisis timespan.
Also, as mentioned above, the activity (number of swaps and swappers) on this DEX was not affected so much but the average volume of swaps has decreased after the collapse timespan.
On the left charts, we can see that majority of swaps during the collapse timespan were done with high volume (more than $10000) but before and after the main days of collapse, we see less-worthy swaps on Uniswap.
Also, we can see the highest spikes of high-volume swaps has achieved during the main days of collapse and on the other hand, swaps with less than $10 volume had the lowest share during the crisis.
Based on the above charts, in majority of days, the number and also volume of swaps from stablecoins to the other assets was more than swaps to stablecoins.
During the main days of collapse, we can see slightly increasing share of number of swaps from stablecoins to other assets.
In terms of volume, we can see that share of swaps from stablecoins has increased significanyly after the collapse timespan.
We can also see a huge high spike of swaps to stablecoins during 12th November. this spike can be because that some users have sold (swapped out) their asset to stablecoins after gaining a satisfying profit from tokens’ price recovery after the collapse.
Totally, we can conclude that the majority of Uniswap traders did not panic during the FTX collapse and have swapped out their stablecoins to other assets that lost a significant amount of their value because of market crash. So, these traders was trying to buy assets in the dip instead of panic selling their own asset and leave market with loss !
Velodrome Finance (Optimism Chain)
Similar to the Uniswap, on Velodrome too, we can see high spikes of increasing swap activity especially in terms of volume during the main days of the collapse.
despite Uniswap, we can see Velodrome was more negatively affected by the FTX collapse during the days after the crisis and its activity and number of active swappers has decreased slightly.
But, we can see almost increasing number of new first-time swappers on this DEX as time goes on and maybe these are people who have left centralized exchanges and are migrating to this decentralized exchange as a safer platform.
According to the left charts, as it was obvious, the swap activity and especially volume of swaps during the main days of the FTX Collapse has increased significantly compared to the days before it and also has the highest average daily numbers than the days after the collapse.
On the other hand, we can see the swap activity and especially volume of swaps on this DEX is on its lowest during the days after the collapse.
On the left charts, we do not see a significant change in a specific volume-type swap after and also during the main days of the collapse.
Anyway, we can see slightly increasing share of low volume swaps (less than $100) after the collapse and maybe this is because that many tokens have lost their $USD value during the market crash or maybe users perform swaps more cautious with lower volume.
And on the above charts, we do not see a significant change in stablecoins’ swap behavior during these 3 different timespans.
Anyway, in terms of volume, we can see some high spikes of swaps from stablecoins during the main day of collapse and also 18th November and this shows similar to the Uniswap, Velodrome traders are also buying tokens in the dip after their lost value.
Orca (Solana Chain)
As mentioned earlier in the first part, Solana ecosystem was the most affected chain by the FTX crisis and we can obviously see dramaticall decrease especially in volume of swaps on Orca after the collapse timespan.
Similar to the previous DEXs, Orca has also experienced highest number and volume of swaps and also active swappers during the main days of the collapse but after this date, we can obviously see dramatical decline in swap activity on this DEX as time goes on.
The interesting thing is that despite this bad situation of the Orca, there are still more number of new first-time users on this platform compared to the days before the collapse.
According to the left chart and as it was obvious, Orca swap volume has decreased significantly after the collapse timespan and also its average daily volume during the main days of the crisis is way more than other timespans.
But in terms of swaps and swappers, we do not see a significant change during the days after the collapse compared to the days before collapse.
The interesting thing on the left charts is huge increasing share of low-volume swaps (less than $10) on during and after the FTX collapse compared to the days before it and on the other hand, we can see significant decline in number of swaps with higher volumes.
So, this shows that majority of swappers on Orca after the FTX collapse are “Shrimps” !
Despite previous DEXs that had the higher share of swaps FROM stablecoins, on Orca, we can see that share of swaps TO stablecoins (selling other assets) is more than swaps from stablecoins and this share is increasing more and more as time goes on.
We can see the highest share of swaps to stablecoins (in terms of volume) during the main days of the collapse and this can be mainly because of panic sellers.
So, we can conclude that the majority of Orca swappers were non-brave users who have sold their asset (swapped them to Stablecoins) in order to flee from losing more money and there are lower share of traders who have bought tokens in the dip after their price drop.
Osmosis DEX
Based on these charts, we can say Osmosis was the least-affected DEX among these analysed exchanges by the FTX collapse timespan.
we can see the number and volume of swaps on Osmosis did not increased significantly (like other DEXs) during the main days of the collapse.
But totally, the swap activity on this platform in all terms of number of swaps, swappers and also volume of swaps is decreasing more and more over time and its total swap activity trend line is declining as time goes on.
Based on the left chart, we can see the average daily volume and number of swaps and swappers on Osmosis during the main days of the collapse is more than other days but not with a high difference (compared to the previous DEXs).
Moreover, we can see that the number and also volume of swaps on Osmosis has decreased after the collapse.
On the left charts, we can see that share of different volume-types on Osmosis during after and before FTX collapse is kinda similar to each other.
But during the main days of the collapse, we can see increasing share of swaps with $100 - $1000 volume and on the other hand, decreasing share of swaps with less than $10 volume.
On the above charts, we can see almost equal share of swaps from and to stablecoins during the days before and after collapse. But, during the main days of the collapse and especially in terms of number, we can see swaps from stablecoins (buying tokens in the dip) has increased significantly.
Overall Comparison of Uniswap, Orca, Velodrome and Osmosis Performance During FTX Collapse
So, totally, we can see that the swap activity on all of these 4 analysed DEXs during the main days of the collapse was at their highest amount compared to the days before and after the collapse because so many users were trying to panic-sell or dip-buy assets because of the market crash.
We can see significant decrease in number of swaps, swappers and especially volume of swaps after the collapse timespan compared to the days before this and this means that traders have totally lost their trust in cryptocurrency platforms after the FTX crisis.
Another conclusino can be that the value of tokens have dropped significantly because of the market crash and as a result, the wealth of swaps made by users with their lost-value tokens has decreased .
Based on the above and left charts, we can see Orca on Solana was the most affected DEX by the FTX crisis because its number and especially volume of swaps has decreased significantly after the collapse timespan.
During the main days of the collapse, Osmosis was least-affected DEX by the FTX crisis.
On the 2 above charts, we can see that price of all DEXs’ native tokens has dropped significantly during the collapse timespan and they were never able to recover their lost value till today but anyway seems UNI and Velo are performing better than other tokens during recent days.
On the left chart, I have calculated the % change of each DEX token compared to its value on 25th October (2 weeks before the collapse) to see how they have performed and how their price was dropped because of the crisis.
As we see, ORCA token has lost the highest value (more than 52%!) after the collapse timespan and was never able to recover its price after the collapse.
On the other hand, We can see VELO token has performed better than other tokens and lost the least value compared to the other DEXs’ tokens.
According to the above and left charts, activity on decentralized exchange especially in terms of number of transactions (which is mainly because of numerous transactions on Solana chain) has decreased significantly after the FTX collapse.
On the main days of the crisis, we can see high activity of users on DEXs but after a while, the number of active users and also number of transactions has decreased over time.
There were not significant number of new first-time users on DEXs during the FTX collapse and we do not see an obvious increasing or decreasing trend of new users on DEXs before or after collapse timespan.
Totally, as we can obviously see, Solana is the most affected chain by FTX collapse and the main reason behind this can be because FTX has invested heavily on this ecosystem and its tokens and during collapse, they were trying to flee from bankruptcy by selling their invested Solana tokens.
According to the left charts, we can see the activity before collapse timespan on DEXs were much higher than the activity during and especially after the collapse.
Also, we can see there were more new-first time users registering on DEXs before the collapse timespan compared to the days after this crisis.
On the above normalised charts, we can obviously see that Solana was the most affected chain by the FTX collapse and the activity of transactions and also unique and non unique users on DEXs of this chain has decreased dramatically after the collapse.
On the other hand, we can kinda see increasing share of other chains like Ethereum as time goes on and this shows users tend to move their assets to a safer and more stable blockchain such as Etheruem in order to be safe from possible next crashed on chains or platforms.
On the left charts, we can see that activity of CEX outflowers (Optimism Wallets) on Velodrome has increased significantly over time and the number of swaps and also swappers is increasing more and more over time. this shows that these users are leaving CEXs and performing more transactions on DEXs as safer platforms.
On the left charts, we can see that activity of CEX outflowers (Ethereum Wallets) on Uniswap has increased significantly over time and the number of swaps and especially swappers is increasing more and more over time. this shows that these users are leaving CEXs and performing more transactions on DEXs as safer platforms.
DEXs’ Native Tokens
Outflower Users From Centralized Exchanges That Have Made Their First-Ever Transaction on These DEXs
On this part, I have extracted the number of first-time users on above-mentioned DEXs who have escaped from CEXs. Actually, We are going to see which platform has attracted the most number of Centralized Exchanges escapers to perform their first-ever transaction on them.
On these charts, Firstly we can see the increasing number of users who have removed their crypto from centralized exchanges and are doing their first-ever transactions on Decentralized exchanges especially during “After Collapse” timespan. This shows that more and more first-time users are escaping from CEXs and migrating to the DEXs and safer platforms.
Moreover, we can see Velodrome ans Uniswap (especially Velodrome on 11th November) have performed better, in attracting the CEXs outflowers and Orca has the least share of these escapers.
Summary and Conclusion
According to the above analysis:
- Solana DEXs were the most negatively affected by the FTX collapse and we have seen a significant decline in swap activity on this ecosystem after the collapse timespan.
- In all of the 4 analyzed DEXs, the swap activity and especially the volume of swaps have reached their highest value during the main days of the FTX collapse and market crash (8th, 9th and 10th November).
- We have seen that none of these DEXs were able to recover their high activity (before the collapse) after the collapse timespan and they were negatively affected by the market crash.
- Orca was the most negatively affected by the FTX collapse and we have seen a significant decline in the number and especially the volume of swaps on this platform over time.
- During the main days of the collapse, the highest share of transactions was done with high volume but after the collapse timespan, we have seen less-value swap transactions compared to the previous days.
- Osmosis has been affected less than other DEXs by the FTX collapse but anyway its total trend line of swap activity and also the volume of swaps is decreasing over time.
- The majority of Velodrome and Uniswap traders have swapped out their stablecoins (bought other tokens) in order to purchase other assets in the dip.
- But in Orca, we have seen more panic-sellers and the majority of swappers, have swapped out their asset (sold them) in order to flee from losing more money.
- The activity of wallets who have transferred their asset out of centralized exchanges (CEX Escapers) is increasing more and more in DEXs and this means users are fleeing from centralized exchanges to safer platforms like DEXs. However, Orca has not performed good in this case at all.
- Uniswap and especially Velodrome have performed well in attracting new first-time swappers from CEX escapers who have done their first-ever swap transactions on DEX.
- ORCA token had the worst performance among other DEXs’ native tokens and its lost value is way more than other tokens.
- UNI and VELO tokens have performed better in recovering their lost price because of the market crash but none of the tokens were able to fully recover their lost value till today.
- So, The growth of decentralized exchanges during the days of turmoil was expected as the cryptocurrency market is built on hype. As such, it came as no surprise to the savvy trader to see Uniswap and other DEXes experiencing surges in volume. Nor was it a surprise to see tokens related to cryptocurrency wallets growing in market capitalization. However, even with the benefits that decentralized trading can offer, the path for DEXes to become the protagonists of the market compared to centralized exchanges is a long one. The user experience barrier of entry is immense, compared to its older competitors that managed to take the bank model and bring more familiarity to the investor. Furthermore, DEXes pretending to be your bank may scare off the crypto novice who might prefer to take the risk of entering the market through a centralized exchange rather than through a DEX like Uniswap. The easiest way is still in the hands of a CEX.
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With compared the left charts with Uniswap and Velodrome, We can say Orca has performed worse than these DEXs in attracting the Solana wallets who have withdrawn their asset from Centralized Exchanges (CEX Escapers).
We do not see a significant increasing activity of these escapers on Orca.