CEX Trading Volumes at 4-year Lows

CEX trading volumes, or centralized cryptocurrency exchanges, have hit a four-year low. According to Coinmarketcap, the COVID-19 pandemic appears to have been the root cause of this drop in CEX trading volumes. As businesses worldwide transitioned to online only, many investors and traders made the switch to decentralized exchanges (DEXs), which offer a more secure and private trading experience.

Binance, one of the largest centralized cryptocurrency exchanges, reported a fraction of the trading volume leading up to the crash compared to previous years. The exchange saw $264 billion in trading volume in Q1, which was down from $461 billion in Q4 2019. The trend continued, with Q2 only seeing $52 billion in trading volume, compared to $162 billion in Q2 in the previous year.

Coinbase, another major centralized exchange, saw a similar decline in trading volume, dropping from $27 billion in May 2019 to $7 billion in May 2020. However, there may be more than just the pandemic to blame for this decrease in trading volume.

The SEC has launched an investigation into Coinbase, which may be linked to the decline in trading activity. The SEC is investigating whether Coinbase is violating securities laws. The outcome of this investigation is still unknown, but it has caused some investors to become hesitant about using the platform.

Binance has also been in hot water recently, with its exchange being accused of facilitating money laundering and terrorist funding. The Malta Financial Services Authority has already flagged the exchange for problems such as insufficient customer identification measures and the lack of a valid license to operate. These accusations have caused some traders to boycott the platform.

Additionally, there has been a growing trend towards decentralized exchanges, which offer a more secure and anonymous trading experience. DEXs have seen a surge in trading volume this year, with the Uniswap exchange hitting a record high of $1.6 billion in trading volume in September.

The rising popularity of DEXs could be attributed to their superior security and anonymity, as well as their appeal to the crypto community’s core values, such as decentralization and online privacy.

Overall, it seems that CEX trading volumes may continue to decrease as investors and traders look towards decentralized alternatives. While some centralized exchanges face issues such as the regulatory investigation of Coinbase and accusations against Binance, it appears that the pandemic has accelerated the trend towards DEXs. With the rise of DeFi applications and the growing popularity of cryptocurrency generally, it remains to be seen what the future holds for centralized versus decentralized exchanges.

But some market players, including Pankaj Balani, CEO of Delta Exchange, believe that even if a shift towards decentralized exchanges continues, the future of centralized exchanges remains optimistic given their practicality. “While DEXs are growing exponentially, this is not a winner-takes-all game. People will keep using both centralized exchanges and decentralized exchanges for different purposes,” he stated in an email interview with Cryptonews. “In time, centralized exchanges will become more DeFi-like and DeFi will become more centralized.”