Defi vs cefi

Is DeFi the solution to current market problems or too early to tell?

On October 16, Bitcoin experienced a 3% collapse when OKEx announced a temporary suspension of cryptocurrency withdrawals. Reports claim that the exchange is being investigated by Chinese police, however, the nature of this investigation is not yet clear.

This news certainly caused a wave of panic in the cryptocurrency market, which caused the loss of altcoins also some of their value. Ethereum, the second largest cryptocurrency on the market, fell 3.94% after news regarding OKEx, and later experienced further selling pressure that pushed the price down 2.5%.

However, Ethereum has a secret weapon in its arsenal, similar to decentralized finance, that helped the cryptocurrency recover from the second incident by returning its price to approximately $ 370.

DeFi or CeFi?

Market observers immediately evaluated the extent of the impact of the following investigation news on OKEx. While most of them are focused on crypto assets, others have shifted their focus to decentralized finance (DeFi) and how it could be a successor to such events exposed to the attention of markets.

Santiment founder Maksim Balashevich provided a graph highlighting DeFi’s performance versus CeFi after the failure of OKEx. Uniswap’s UNIwap token saw entrepreneurs enter its business once the news became public.

The UNI token hit first due to market flow and ETH reaction, but shortly after that saw an extraordinary recovery that was later confirmed. When UNI showed a positive increase, many cryptocurrency users were shocked while others thought DeFi could be a "safe haven against centralized exchanges".

Market analyst @Akadosang tweeted: “BREAKING: the cryptocurrency investors rushed to the UNI token when they realized it was a safe haven against centralized exchange. #DeFi has seen a wave of inflows with some DEXs exceeding Coinbase in volume ”.

An "imperfect logic"

However, bitcoiners and other cryptocurrency enthusiasts quickly called this narrative the result of “defective logic”. Traders argued that the UNI price was pumped to a reduction as it dropped immediately after the news was published.

While the opinion of people in favor of decentralized exchanges rather than centralized ones is summed up in Udi Wertheimer’s tweet worrying that “Defi markets are 100 times easier to stop than centralized exchanges ... but don’t let the facts affect you ".

The debate will continue as the market tries to be more decentralized and the question of whether "DeFi" or that "will solve it" may need to be tried and tested before making any final decision.