Centralized crypto exchanges (CEXs) are facing a tough time as their trading volumes have fallen to lows not seen since 2017. This decline in trading activity was observed even before the recent lawsuits filed against major exchanges like Binance and Coinbase.
CEX Trading Volumes in 2021
According to data from CryptoCompare, the daily trading volume on CEXs fell from an average of $15 billion in January 2021 to just $2.7 billion in July 2021. This represents a decrease of over 80% in trading activity.
The decline in trading volumes can be attributed to several factors, including the increasing popularity of decentralized exchanges (DEXs) and the growing regulatory scrutiny faced by CEXs.
The Rise of DEXs
Decentralized exchanges have gained popularity due to their ability to provide a more decentralized and secure trading experience. DEXs operate on a peer-to-peer network and allow users to trade directly with each other without the need for a central authority. This eliminates the need for intermediaries and reduces the risk of hacks and other security breaches.
Moreover, DEXs provide users with more control over their funds and greater privacy. This has made them a preferred choice among traders who value their privacy and security.
CEXs have faced increased regulatory scrutiny in recent years due to concerns over money laundering, fraud, and other illegal activities. Many countries have implemented stricter regulations on crypto exchanges, which has led to a decline in trading volumes.
Moreover, the recent lawsuits faced by major exchanges like Binance and Coinbase have further eroded the trust of users in centralized exchanges. This has led to a shift towards decentralized exchanges that are perceived as being more transparent and trustworthy.
The declining trading volumes of centralized exchanges highlight the need for the crypto industry to adopt more decentralized and secure trading solutions. The rise of decentralized exchanges is a positive development for the industry as it provides users with greater control over their funds and reduces the risk of hacks and other security breaches. Moreover, the growing regulatory scrutiny faced by centralized exchanges underscores the need for the industry to adopt more transparent and trustworthy practices.