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    Home » Crypto News » Centralized Exchanges Hurt as Chinese Investors Chase DeFi Gems

    Centralized Exchanges Hurt as Chinese Investors Chase DeFi Gems

    Author: Jordan Lyanchev

    Last Updated Sep 8, 2020 @ 13:02

    Chinese cryptocurrency investors are reportedly reducing the liquidity on centralized exchanges by locking their assets in return for yield farming rewards.

    According to a recent publication, Chinese investors are using a lot of the ETH they buy on centralized exchanges to pursue DeFi opportunities.

    This essentially reduces liquidity, and exchanges are forced to limit or even suspend withdrawals.

    DeFi Growth In China Causes Issues For Exchanges

    The DeFi craze exploded earlier this year. Projects began surfacing daily with new developments, promising high returns to lure investors into locking their cryptocurrency assets in their protocols.

    The total value locked (TVL) in such protocols skyrocketed from $500 million to its recent all-time high of nearly $9.5 billion in about six months.

    Interestingly, some reports suggest that Chinese investors were somewhat late to the party, having to bear the country’s conservative approach towards the digital asset industry. However, the TVL’s latest pump coincided with an ATH for DeFi searches on the popular Chinese social media platform – WeChat.

    ADVERTISEMENT

    Data provided by a local reporter confirmed the rapidly growing demand from Chinese investors towards DeFi. He noted that users have been buying lots of ETH, the most widely used token for swapping for DeFi coins, especially when the asset’s price tanked a few days ago.

    Investors use the purchased ETH and transfer it to decentralized exchanges (DEX) for farming. As a result, he concluded that the liquidity on centralized exchanges (CEX) is “falling frantically.”

    Decreasin Holdings On CEX Operating In China. Source: CryptoQuant
    Decreasing Holdings On CEX Operating In China. Source: CryptoQuant

    Exchanges Fight Back

    The reporter claimed that the exchanges are taking some radical measures to prevent further declines in their liquidity.

    A few days ago, users experienced “difficulties in withdrawing coins,” and even shutdowns as CEX operating in China limited and, in some cases, entirely suspended withdrawals for undisclosed periods. The Chinese community reportedly reacted by launching a “coin withdrawal campaign,” urging investors to withdraw all of their cryptocurrency holdings from the exchanges and delete their accounts.

    Following the latest developments, CEX reversed their approach. The reporter asserted that they started to list numerous DeFi tokens to “make users gamble in the secondary market, and helping users with yield farming.”

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    Tags: China DeFi
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    About The Author

    Jordan Lyanchev
    More posts by this author

    Jordan got into crypto in 2016 by trading and investing. He began writing about blockchain technology in 2017. He has managed numerous crypto-related projects and is passionate about all things blockchain. Contact Jordan: LinkedIn

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