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DEXs gain popularity and reduce spaces to centralized bitcoin exchanges

The activity of decentralized exchanges (DEX) of bitcoin (BTC) and other cryptocurrencies exceeded the volume of transactions compared to centralized exchanges (CEX), thanks to the popularity acquired by decentralized finance (DeFi) .

This is suggested by the blockchain analysis firm, Chainalysis, in its most recent report entitled “ Cryptocurrency Exchanges 2021. An Analysis of the Competitive Landscape «, published this Tuesday, November 8.

A centralized exchange, according to the definition of CriptoNoticias, is a company that is in charge of the custody and exchange of its clients’ funds, using its own funds, very similar to fiat money exchange houses. Examples They are Coinbase, Binance, Okex and others.

Meanwhile, a decentralized one is one that works based on smart contracts. Thus, greater transparency on operations is granted. Examples of DEX are Uniswap, Bisq and 1inch.

According to the firm, the preference towards DEX causes users to have greater control over their assets and access to new types of operations.

According to Chainalysis, both innovation and reach are prevailing areas for the differentiation between exchanges and the growth within an industry that has already been consolidated.

In fact, and according to the following graph, growth is denoted sustained in the DEX from the first quarter of 2019 and until the third of 2021.

On its heels they were, to a certain extent period, OTC brokers (who tend to work with large investors, both private and institutional), before falling towards recent months. Possibly this fall is due to the fact that the purchases of large investors were declining while the price of BTC approached the historical highs again.

And following the analysis, the CEXs, derivatives exchanges and those specialized in high-risk products; showed some growth, but then fell, revitalizing the position of the DEX.

Growth in number of active exchanges by business model: OTC (broker), DEX, derivatives,
CEX and high-risk exchanges. Source: Chainalysis.

Transactions in DEX exceed those of CEX

The growth of DEX has been so great that the total value received and handled on these platforms grew a little more than USD 10 billion, this in July 2020. Then it reached a peak of USD 368 billion in May 2021. And then, in September, it stabilized and stood at just under $ 143 billion.

According to Chainalysis, DEX users execute “much larger” transactions than those referred to centralized exchanges. In figures, they reveal that the average transaction on a DEX is more than USD 26,000 in cryptocurrencies, compared to USD 12,000 for CEX. The median, for a DEX, is a little over USD 900 compared to USD 150 for centralized ones.

«This is probably because DeFi is also more popular in countries with markets for larger and more established cryptocurrencies, which also tend to be richer countries, “they say from the firm. “The most important thing here is that DEXs have become extremely popular, which coincides with the explosive growth of the DeFi category in general,” they add.

Knowing this, it makes sense that the average size of your transactions is larger, as users of a DEX are likely already have accumulated a large fund base to implement or are investing money on behalf of others.

Chainalysis, cryptocurrency market analysis firm.

It is not very distant from other studies, such as Messari, which stated that in the second quarter of 2021, the DEX moved more than USD 400 billion , as recorded CriptoNoticias.

This can also respond to the characteristic of the DEX, of not requesting the requirements “Know Your Client”, or KYC, something beneficial, t Both for the comfort that it supposes, and for those who want to maintain the privacy of their financial transactions.

The total value received and handled in DEXs grew to a little more than USD 10 billion
in July 2020. Source: Chainalysis .

But centralized exchanges are still important

Even highlighting the power of DeFi and its various platforms, centralized exchanges continue to have an important weight in cryptocurrency trading. In fact, they claim that continue to grow and appear to be the ones offering the widest variety of assets, “which keeps them attractive to most traders.” , according to the firm.

They clarify from Chainalysis that the «more modest» growth of centralized exchanges «shows that they still have an important role to play in the world of cryptocurrencies».

As adoption grows, most New users will acquire their first cryptocurrency through centralized exchanges, as these are usually the easiest services for exchanging fiat currency for different types of cryptocurrencies. Also, even seasoned traders and DeFi users who want to exchange cryptocurrencies for cash will need to trust these services.

Chainalysis, cryptocurrency market analysis firm.

And what are the most traded cryptocurrencies?

Chainalysis clarifies it. They say that, in general, the fastest growing categories of exchanges tend to dedicate most of their volume of transactions to bitcoin or ether , something, depending on explain, “relatively unsurprising”, since these are the two most popular digital currencies on the market.

But there are notable exceptions. They suggest that cryptocurrency derivatives exchanges, which are all financial instruments whose value is anchored to another asset, were the fastest growing category by value received during the time period covered (January 2019 and August 2021), where stablecoins were the most traded assets.

The same is for the largest exchanges, in addition to the exchanges C2C, or cryptocurrency-cryptocurrency, which obtained, respectively, the third and sixth fastest growing categories.

The reason The likely reason for this is that both derivatives and C2C exchanges cater to experienced traders and do not allow on-platform conversion to fiat currency. Because of that, traders rely on stablecoins to lock in the value of their assets when they no longer want to trade or remain exposed to cryptocurrency price changes.

Chainalysis, cryptocurrency market analysis firm.

DeFi in front of everything

It is unlikely to estimate with certainty what 2022 holds, but it is possible to infer that, as it is already happening, a large participation of the DeFi , and with them, the DEX.

In fact, and for example, the rapid growth and acceptance of decentralized finance is the reason why, in a matter of a year, the Central, Northern Europe region and Occidental received more than USD 1 trillion in cryptocurrencies, or 25% of all global activity , according to what was reported by CriptoNoticias.

It was even known that DeFi protocols represented three to four of the five most used services by companies for trading cryptocurrencies, being Uniswap, Instadapp and Dydx the platforms with the most recurrence.

Time will tell.

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Sandra Loyd
Sandra is the Reporter working for World Weekly News. She loves to learn about the latest news from all around the world and share it with our readers.

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