Analysts at investment bank JPMorgan believe that despite the collapse of FTX, centralized exchanges will continue to be popular with users, as they see certain risks in DeFi protocols.
The collapse of the FTX exchange shocked the entire cryptocurrency community, so a number of market participants believe that the incident undermined the credibility of centralized trading platforms and opened up new opportunities for decentralized finance (DeFi) protocols. This opinion is shared, for example, by the CEO of the world’s largest crypto exchange Binance, Changpeng Zhao.
However, JPMorgan analysts believe that DeFi, despite its advantages, still has some limitations. Analyst Nikolaos Panigirtzoglou said that users are unlikely to completely switch from centralized exchanges to decentralized platforms. Most price data is generated in centralized marketplaces, and DeFi protocols rely on oracles from which they get price information.
Moreover, DeFi projects are more prone to hacks. According to Chainalysis, in the first eight months of 2022, hackers managed to steal $1.9 billion in assets from cryptocurrency projects, with preference given to DeFi protocols.
Among other functional shortcomings of DeFi, Panigirtzoglou noted over-collateralization and the lack of a stop-loss feature. However, some DeFi protocols solve these problems, the analyst misspoke. According to him, the speed of transactions in DeFi is much lower, and this puts users at a disadvantage compared to traders trading on centralized exchanges.
In addition, the transparency of transactions in DeFi protocols can also be a problem for traders who do not want their trading strategy to be fully available on the blockchain.
Earlier, JPMorgan analysts said that there are advantages to the FTX fiasco: it will accelerate the adoption of regulations governing the operation of cryptocurrency companies. In turn, this will expand the adoption of cryptocurrencies among financial institutions.
Source: Bits
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