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Declining DEX volumes show that DeFi investors are returning to Bitcoin

The steady decline in DEX trading volumes and the drop in DeFi token prices suggest that investors have turned their attention back to Bitcoin.

All eyes are on Bitcoin Optimizer as the digital asset continues to move towards a new annual high. According to media reports and Harvest investors, the hacker executed a flash loan exploit that used millions of dollars in crypto currencies at Uniswap and Curve to sink the perceived prices of USDT and USDC tokens at Harvest Finance.

The attacker then bought these tokens at a discount and then used them to pay back the initial flash loan, getting a good cut in the process. By doing this several times, the volumes at Uniswap were inflated.

While the hacking increased the daily volume on the DEX to just over $5 billion per day, the anomaly was short-lived and since then the volume still appears to be in steady decline.
Daily DEX volumes. Source: Dune Analytics

In the second half of October, the DEX recorded the worst week in terms of trade volume since August. Weekly volume fell from a record $8 billion in the first week of September to approximately $3 billion from October 19-25. Uniswap continues to lead with a 56% market share of all DEX trading volume.

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Weekly volume of DEX. Source: Dune Analytics

Despite the correction observed in DeFi’s assets and the reduction in trading volume, the total blocked value has remained close to historical highs. DeFi Pulse’s data shows that the total blocked value is currently at USD 11.2 billion, a small drop from the historical high of October 25 of USD 12.46 billion.
Total blocked value (USD) at DeFi. Source: DeFi Press

DeFi season ends just as the Bitcoin bullishers return

As the turmoil around decentralized finance subsides, Bitcoin is back in the spotlight. The price of Bitcoin has shot up by about 24% since early October with multiple high-profile bets made by corporate giants like Square and Paypal, the latter of which could help triple Bitcoin’s user base in the not-too-distant future.

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The decline in the volume of trade in the DeFi niche shows that traders have lost interest to some extent, withdrawing their profits and taking them to Bitcoin. This thesis is supported by the increasing volumes observed in Bitcoin products.
Volume of Bitcoin futures by exchange. Source: Digital Assets Data

While it is difficult to estimate the impact that institutional actors are having on Bitcoin’s price action, recent purchases and increasing volumes of options and futures indicate that the bulls have returned to the game.

After PayPal announced that it will add Bitcoin to its platform, the price of BTC went up by almost 10%. On October 23rd, Grayscale announced that the exorbitant figure of USD 300 million in cryptoactives were added in a single day and the firm currently has USD 7.6 billion in assets under management.

Can DEX survive?

With investors turning their attention back to Bitcoin, some are wondering what the future holds for decentralized assets. The total value locked in at DeFi has remained high, but this may soon change due to declining trading volumes on decentralized exchanges.

With investors turning their attention back to Bitcoin, some are wondering what the future holds for decentralized assets.

The total value locked in at DeFi has remained high, but this may soon change due to declining trading volumes on decentralized exchanges.