Exchanges suffer as Chinese users chase DeFi gains

Despite the recent sell-off quickly wiping $2 billion from the total value locked in the decentralized finance (DeFi) sector, Chinese demand for DeFi appears to be growing.

Daily searches for ‘DeFi’ on the popular Chinese social media platform WeChat spiked to a new all-time high on September 2 of nearly 900,000 — nearly doubling the previous record of 500,000.

On September 7, Chinese journalist Colin Wu reported that many local exchanges were suffering from liquidity issues amid wholesale withdrawal from customers looking to cycle funds into DeFi protocols.

Wu posted charts indicating that many Chinese traders who bought the recent drop in the price of Ether (ETH) had quickly moved to transfer their assets to decentralized exchanges (DEX) for yield farming.

He reports that in response many exchanges have suspended withdrawal services, escalating tensions and giving way to the emergence of a popular “coin withdrawal campaign:”

Breaking: On Sep 6th, many exchanges in China experienced difficulties in withdrawing coins and shutdowns. Chinese community is launching a “coin withdrawal campaign”, calling to withdraw all USDT and crypto in the exchange and delete their accounts. pic.twitter.com/JwUzRFbqXx

— Colin Wu（WuBlockchain） (@WuBlockchain) September 7, 2020

Wu speculated that the increased prevalence of “crazy” DeFi coins among Chinese exchanges is a defensive measure intended to prevent the migration of capital onto decentralized exchanges.

Adding to the evidence of surging local interest, Chinese crypto reporter ‘Molly’ tweeted on September 2 that DeFi was finally starting to catch on with local investors who have been pooling funds to establish a “farming fund,” adding that “many people are planning their own projects.”

The record spike in WeChat searches coincided with the recent all-time high for the total value of assets locked in the DeFi sector, which fell from $9.5 billion on September 2 to roughly $7.5 billion on September 6, according to DeFi Pulse. Searches for ‘DeFi’ on WeChat also dropped back to 450,000 over the same period.

As of this writing, the DeFi sector holds $8.1 billion. Uniswap is the top-ranking protocol with $1.57 billion, followed by Aave with $1.37 billion, and MakerDAO with $1.29 billion.