Over £133 million was spent in the final hours of Monday's deadline.
Defoe told the Daily Express: “I watched it all as it unfolded. It was interesting to see what goes on, especially when you’ve been involved in that yourself.
“When you’re settled and you know you’re not going anywhere you can just chill out, relax and see what goes on. It was mad the amount of money spent, compared to last January. How much was it then? £30m? And [this window] was more than £200m - it’s crazy.
“And the money that was asked for some players, it’s just mad. But that’s how it’s going. If you want the top players, you’ve got to pay.
“Liverpool are going in a different direction now. They’ve got a new manager and Andy Carroll is a good, strong signing. Torres going to Chelsea – that has been on the cards for a while.”
Chelsea’s hefty investment in Torres and £21m centre-back David Luiz comes in the week they appear to have woken from their mid-winter slumber – something Defoe believed was inevitable.
“When people were saying, ‘Oh, Chelsea might be gone’, I said, ‘Well, it only takes one game and they’ll be back’,” he said. “And they’ve picked it up now. They’ve got great players with a lot of experience – and now Torres.
“When a club sign a new player – and a big player – it lifts the whole place. Other players want to impress him. The fans are going to be buzzing. I can’t see them dropping many more points.”