On November 17, crypto company Chainalysis posted a market update. A report awaited by market players to get a more detailed picture after the fall of the FTX exchange.
The firm acknowledged that other companies may face insolvency issues following the collapse of FTX last week. However, they see that the market remains fundamentally stable. According to them the FTX situation stems from “financial fraud rather than block or crypto-specific failures.”
Chainalysis looks at the crypto/USD trading factor that surged last week as panicked investors cashed out. A total of $270 billion was taken out within four days of the collapse. This resulted in total market capitalization plunging to a new cycle low of $830 billion on November 10.
Coincidentally, this is the same figure that was reached as the peak of the cycle in January 2018. The firm noted that fiat outflows have now stabilized back to pre-incident levels.
"Users now appear to be withdrawing crypto at roughly the same rate as before the FTX crisis." The firm also found that net inflows to centralized exchanges have declined.
The data shows that some funds will go to other centralized exchanges, but there is an increase in the movement to private wallets. There has also been an increase in funds sent to DeFi protocols which can also be seen as a step towards self-custody crypto.
"CeFi-to-DeFi flows have increased, but they are not the driving force behind the growth in DEX transaction volume," he said. Around 90% of DEX inflows come from smart contracts and other MEV bots.
This shows that there is not a huge inflow of CEX to DEX or DeFi, but existing users and bots are exploiting market volatility to profit.
Total market capitalization has declined by 1.6% on the day of the fall to $871 billion at the time of writing. BTC is currently trading at a trading level of $16,502.25.
