Decentralized exchanges become go-to for traders
Despite China’s ban on cryptocurrency trading and mining that sent values tumbling last week, leading cryptocurrencies including Bitcoin and Ethereum have shown a bounceback in trading and seem to have avoided the worst-case scenario for their notoriously volatile valuations.
Most of the world’s bitcoin mining takes place in China, so the government seemingly getting serious about this latest in a series of crypto crackdowns might have larger effects in the long term. Crypto exchange websites such as Huobi, Binance, and Coinbase are scrambling to close accounts based in mainland China by Dec. 31 and preventing users with Chinese phone numbers and IP addresses from opening new accounts.
To skirt the rules, traders are turning to decentralized exchanges that offer peer-to-peer exchanges with detailed smart contracts, Business Insider reports.
“Decentralized exchanges Uniswap and Sushiswap have seen a surge in usage, which is likely a result of China’s ban on centralised exchanges. Since DEX’s only require a crypto wallet and no KYC (know your customer), it is much easier to use and can be set up in a matter of minutes,” Jonas Luethy, junior sales trader at digital asset manager Global Block, said in a newsletter.
Popular decentralized exchanges saw their values rise between 30 and 40% on Monday, a clear indication that traders will head there for transactions as more users are shut out of the big exchanges.
The People’s Bank of China cited “money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities, seriously endangering the safety of people’s property” for its crackdown.
Whatever else decentralized exchanges do for cryptocurrency, with anonymous transactions and the possibility of off-chain order books that record only a final transaction and are less secure, they’re almost sure to increase illegal activity. Still, with $50 million in new investment in Bitcoin and nearly $30 million in Ether last week, investors definitely see the development as a growth opportunity.
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