While hard-line regulatory agencies will likely be encouraged by the complete failure of crypto exchange FTX and the discord that followed, experts like Julian Hosp of Defi Chain thinks that the resulting erosion of user confidence in centralized institutions will likely restore interest in decentralized finance (defi) and related products.
Those consumers are likely to migrate to self-custody, according to Hosp, if they still think that cryptocurrencies offer a valuable alternative to centralized finance.
Many customers have reportedly begun withdrawing their assets from centralized crypto exchanges because they are reportedly alarmed by the scope of FTX’s misappropriation of client monies.
Exchange platforms (including FTX before its collapse) have occasionally struggled or failed to process withdrawal requests in a timely manner due to the exceptionally large amount of withdrawal requests.
The traded volumes on defi networks like Uniswap and Defi Chain, however, have increased throughout the same time frame.
For instance, on November 14, Uniswap published a tweet stating that a new record of 55,550 active daily wallets on the defi platform had been reached. The tweet might imply that Hosp’s and other cryptocurrency experts’ prediction is already coming true.
Meanwhile, Hosp observed that the ongoing FTX-related activities had been successful in scaring off potential customers in a written answer to inquiries from Bitcoin.com News.
Trust is currently in tatters. Existing cryptocurrency users are more likely to switch to self-custody and Defi, but new investors will hold off until everything has calmed down, which could take some time, according to Hosp.
Hosp, who founded Defi Chain alongside U-Zyn Chua, stated that going forward, he anticipates “a negative price movement over the following months.” The CEO claims that this trend won’t be reversed until “everything has healed.”
Although the cryptocurrency market has survived many storms before this one, several analysts have cautioned that the death of FTX might still lead to a much more severe ecosystem-wide meltdown.
They cite reports of users on specific exchange platforms having issues withdrawing money. When asked if such a crash could be avoided, Hosp responded that it would mostly depend on how severe the FTX/Alameda fallout’s subsequent effects would be.
“At the moment, it’s really difficult to measure this. If the consequences are minimal, the impacted platforms can either come up with a solution on their own (as demonstrated by Huobi’s recent announcement of an 18 million USD shortfall) or other players like Binance can step in. We can only prepare for impact if it begins to behave like a wildfire, Hosp added.
Like his peers, Hosp stated that he thinks the FTX scandal’s aftermath empowers authorities and gives them justification for taking action against the cryptocurrency sector.
Featured Image: Julian Hosp, Co-founder, DeFi Chain
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