Chinese Investors Turn to Yield Farming Despite The Recent Crash of DeFi Token Prices

Chinese investors are jumping onto decentralized finance (DeFi) despite the recent collapse in crypto markets. In an observation first published on Twitter by Chinese journalist Colin Wu, Chinese crypto exchanges are facing a log-jam of withdrawals as users rush to invest in DeFi tokens.

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

Over the past few weeks, searches for the word “DeFi” have skyrocketed on the popular Chinese messaging app, WeChat, reaching a high of 900k searches on September 7^th. The increase in anticipation and demand for these tokens arises from the supernormal growth and APY returns offered by farming protocols, a trend Wu believes will continue in the future.

Wu also reported a shrinking liquidity pool on local crypto exchanges as investors withdraw large amounts of crypto to cycle them into DeFi. The withdrawals caused several exchanges to shut down operations to prevent a bank run on their liquidity pools.

The Chinese crypto community has since responded to exchanges locking them out of their fund's launching, a “coin withdrawal campaign.” The campaign calls on all investors from troubled centralized crypto exchanges to withdraw their tokens and “delete their trading accounts.”

The data shows that due to the popularity of yield farming, especially the recent sharp drop in the price of ETH, many users buy bottoms on exchanges and then transfer to DEX for farming. The stock of ETH and other farm crypto on the exchange is falling frantically. pic.twitter.com/I6982HMVTL

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

Data shows the reserves of crypto exchanges present in China have been depleted with the rise of decentralized finance. Following a massive bull run on the majority of “farming tokens,” the recent slowdown in price has seen Chinese investors rush to fill their bags with ETH in preparation for the net mega bull run. Colin Wu wrote on Twitter,

“[…]The recent sharp drop in the price of ETH, many users buy bottoms on exchanges and then transfer to DEX for farming. The stock of ETH and other farm cryptos on the exchange is falling frantically.”

According to Wu, these exchanges are being forced to list these DeFi farming tokens to keep the investors on their platforms and prevent the move to DEXs.

The DeFi ecosystem has a total locked value (TVL) of $7.7 billion, falling from an all-time high of $9.5 billion recorded earlier in September, according to DeFi Pulse. The DeFi ecosystem started off the year with a TVL of $674 million, experiencing over 9X growth in the past nine months or so. With Chinese investors getting into the ring, the DeFi space could be set for another soar in the near future.