Market deep dive: FTX Chapter 11 filing has had a domino effect on the rest of the market

BTC$ is currently trading at 16.6k. ETH$ is showing more resilience, currently at 1.2k, and has not yet seen June lows, which BTC already broke through.

As presumed, last week’s FTX Chapter 11 filing has had a domino effect on the rest of the market. The likes of Gemini, BlockFi, Liquid, and Genesis have all halted withdrawals. Many are afraid the fall of Genesis could still cause the largest shakeout in the market. In short, they lend out the deposits of large crypto players, including Gemini and BlockFi, who promise their users yields. Now the worry is that the yield-generating counterparties cannot repay what they borrowed, and depositors essentially lose the funds.

As a result of distrust in centralised venues, confidence in DeFi should return. Even if the DeFi we know today may not be feasible on an institutional scale, it has advantages, especially for retail, as smart contracts govern a borrower’s collateral on borrowing and lending platforms, as well as the liquidity in pools on decentralised exchanges.

According to data from theblock.co, DEX volume increased by 72% MoM, after seeing consistent declines since the end of last year. DEX to CEX spot trade volume is currently at 16.75%, but I am expecting for this to edge closer to the previous ATH of 25.52% in February.

The decentralised perpetuals sector is the best weekly performer, after Fan Tokens. The largest constituents, DYDX and GMX, both made sharp moves last Wednesday, and are currently up 14% and 23% on the week. Last week, GMX saw its highest exchange volume, while DYDX saw a 6-month high. Likely, they drew attention as perpetual traders will have to find a new home after the downfall of FTX, which was notoriously known for perpetual trading.

The heightened DEX volume seems like an intermediate stint for now. What really will point to a renewed DeFi rally will be an increase in TVL across protocols if activity and development returns.

Also, check out the FTX post-mortem report released at the beginning of the week. There will be a detailed update released in the coming weeks.