Chinese traders are reportedly withdrawing their ETH, USDT, and crypto holdings in droves from centralized exchanges (CEXes) to decentralized exchanges (DEXes) for yield farming as per a tweet on Sep 7.
DeFi FOMO in China
Following difficulties of coin withdrawal on Sep 6, a source reveals that a campaign was launched by affected persons, urging users to withdraw and delete their accounts. The call has since seen exchanges hemorrhage ETH and DeFi tokens stock as traders flock to DEXes with better offers.
“Breaking: On Sep 6th, many exchanges in China experienced difficulties in withdrawing coins and shutdowns. The Chinese community is launching a “coin withdrawal campaign”, calling to withdraw all USDT and crypto in the exchange and delete their accounts.”
There are reports that DeFi in China is “just getting started.” According to the Head of Marketing Hash Key Hub, some users have resorted to pooling funds to create a “farming pool” fund.
Dovey Wan, the advisor of CoinDesk, chimed in, saying “pragmatic Bitcoiners jump on Bitcoin alpha to make more BTC.”
Yields are Irresistible
Decentralized Finance, or simply, DeFi, is a hot topic in crypto circles. Already pushing activity in Ethereum and return very high yields for participants, several innovative trustless finance dApps remain attractive.
The act of yield farming or liquidity farming, in this case, involves traders either withdrawing their crypto assets from centralized exchanges where they are exposed to counter-party risks to a non-custodial exchange where they have full control of their assets. Here, they can either participate in liquidity provision through portals like Uniswap or SushiSwap—which is hugely popular in China or lend to borrowers via MakerDAO and the rest.
Here, not only have traders turned farmers control proceedings but they earn better yields—sometimes over 600 percent on top of indirectly contributing to better ETH prices. ETH is the native currency of Ethereum and all fees are paid in Gas denominated in ETH.
Also, by providing liquidity, they earn LP tokens designed specifically to pump depending on participation.
Combined, all these value propositions availed trustlessly via DEXes could perhaps explain the outflow of crypto assets which are used as equipment for any ambitious yield farmer. The only downside which is slowing current activity is the high transaction fees which have forced some yield farmers to throw in the towel, threatening the viability of smart contracts.
Centralized Exchanges Adapting
The rising popularity of DeFi and the risks it presents to the long-term profitability of CEXes is forcing leading exchanges to act.
Recently, as reported by BTCManager, launched “Build for Bharat”—the first DeFi-focused hackathon in India.