Bernstein: Crypto User Activity Is Moving On-Chain Following FTX's Collapse

Crypto user activity is moving on-chain following the collapse of FTX and sister company Alameda Research last month as self-custody comes back into vogue, Bernstein said in a research report Wednesday.

More investors are storing crypto in their own wallets instead of with centralized exchanges, and this is reflected in higher trading volumes and user growth for decentralized finance (DeFi) spot and derivative trading platforms, the report said. DeFi is an umbrella term for a variety of financial applications carried out on blockchains.

On-chain data shows “higher momentum on user acquisition, and activation post-FTX.” In the past 60 days both revenue and the number of transactions have grown, analysts Gautam Chhugani and Manas Agrawal wrote.

While these are early trends, the transition to on-chain markets, with their greater transparency, is a positive development in “crypto’s journey to rebuilding customer and policy-makers' trust,” Bernstein said.

The Arbitrum and Optimism blockchains are seeing the strongest momentum in user growth, and transaction and revenue momentum since the FTX unwind, the note said. On-chain momentum gives a strong indication of which blockchains are driving more economic activity and thus benefiting from investor flows, the note added.

Solana, which was viewed as the native blockchain for the FTX/Alameda ecosystem, is experiencing the strongest deterioration. Users have moved to other chains following the demise of Sam Bankman-Fried’s empire, the report said.

Binance Smart Chain has made modest gains in active user trends over the same period, the report added.

Read more: JPMorgan: Push to Regulate Crypto to Accelerate After FTX’s Collapse