Trading volume on centralized crypto exchanges (CEX) reached its lowest since October 2020, while decentralized platforms (DEX) are booming. Analysts attribute this trend to increased regulatory pressure on CEXs and predict further growth in the popularity of DEXs.
User activity on CEXs decreased dramatically. According to The Block, monthly trading volume on major centralized cryptocurrency exchanges was only about $439 billion in May 2023, down 37% from April and more than half of what we saw in March this year. In all, trading volume on CEXs in May was the lowest since October 2020.
In contrast, decentralized platforms have experienced a surge in recent months. According to DefiLlama, trading volume on DEXs in March 2023 hit a 10-month high of $134 billion, while trading volume on DEXs exceeded 20% of the centralized exchanges, which is also an all-time high.
Analysts and experts say that the rapid growth of DEXs is clearly related to a waning interest in trading digital assets on CEXs.
Alexandra Korneva, Co-Founder and CEO of cross-chain aggregator Rubic, commented on the current situation for CP Media. She says the trend for decentralized solutions has been observed since 2022 because the security concern about centralized exchanges was no longer crucial for many users after FTX collapsed. On the other hand, users often choose CEXs for their lower commissions, but Layer-2 protocols such as Arbitrum successfully address this issue.
Alexandra also believes that the level of popularity of CEXs has been significantly affected by regulatory scrutiny.
“We can see more and more exchanges leaving certain countries or limiting the ability to buy particular tokens, thereby depriving users of the opportunity to buy what they want. And this goes against the values of the cryptocurrency community, so users choose decentralized solutions with no such restrictions,” says Alexandra. In her opinion, we should expect further growth of users on decentralized exchanges, because DEXs will continue to evolve, becoming more convenient and secure.
One more factor affecting the activity of CEXs is the refusal of large market makers to support digital asset trading. Earlier this month, Jane Street Group and Jump Trading scrapped their trading plans in the U.S. due to ongoing regulatory pressure in the country.
