Institutional funds move to DeFi, trading volume surges

a chainanalysis report It shows That the collapse of FTX caused a massive outflow from CEXes to DeFi protocols led to a spurt in trading volumes. A significant portion of assets were also moved to non-custodial wallets such as Ledger, Trezor, and MetaMask.

Institutional investors mainly led the movement of funds

Chainalysis says that sudden changes in trend and cash flows from CEX to non-custodial wallets have often been the result of extreme market volatility. However, this time, the main reason was institutional money.

A significant number of institutional investors are now using DeFi to manage their funds, based on an analysis of trading volumes, indicating that they are leaders in the development of the crypto industry. This raises new questions about the industry’s ability to provide the necessary tools and resources to enable safe and secure transactions.

According to Chainalysis on-chain Information, they are likely to keep the funds in their wallet or move them to a new CEX. They are also using DeFi to interact with the various financial functions of the platform, such as trading, investing and lending. This eliminates the need for an intermediary to manage an individual’s money.

The increase in inflows is largely attributed to the growing number of institutional investors who are using DeFi to move their funds. Given the growing number of institutional investors using DeFi to manage funds, it is clear that they are leading the way. Evolution of the cryptocurrency ecosystem.

dispelling common misconceptions

Chainalysis then cleared up some of the misunderstandings. Due to their technical capabilities, many believe that personal digital wallets pose a significant risk to illegal activity as they can conduct transactions without any third party intervention.

Some regulators and lawmakers have cited this issue as a reason to impose stricter compliance rules on such transactions. However, the data shows that these transactions do not expose themselves to significant illegal activity.

Notably, from 2020 to 2020, less than 1% of the money people sent and received from their personal digital wallets on these platforms came from addresses associated with illegal activity. This is because, in most centralized exchanges, users are required to go through Know Your Customer (KYC). checks before they can even start using them.

If someone has made a suspicious transaction involving an individual digital wallet on a central exchange, law enforcement can subpoena the exchange to identify the owner of the wallet.


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