Investors are turning away from centralized exchanges (CEX) to embrace decentralized exchanges (DEX) with growing fervor. The reason behind this move is clear: the bear market and the recent collapses of major players in the crypto ecosystem have sown doubt and distrust in CEX.
Investors deviate from CEX
Market data converge on a clear observation: in the light of the bear market, and more precisely of this terrible year 2022 which saw the collapse of leading players in the crypto ecosystem (FTX, Celsius, Terra, 3AC) , investors are abandoning centralized exchanges (CEX) in favor of decentralized exchanges (DEX).
Figure 1 – CEX trading volumes
Currently, about 5 billion dollars are traded daily on centralized exchanges, a low point that had not been touched since 2020. Beyond pure trading, we can also see that CEX are neglected when it comes to storing cryptocurrencies. A point that does not come as a surprise, investors being afraid that an FTX scenario will repeat itself.
At the time of writing, approximately 2.3 million Bitcoins (BTC) are hosted on centralized exchanges, compared to 3.2 million in March 2020 during the high point for this metric. Since then, the number of BTC stored on CEX has continued to decline.with a particularly noticeable decrease in November 2022 (fall of FTX).
Figure 2 – Number of BTC hosted on exchanges (orange) and BTC price (black)
According to our analyst Prof. Chain, whose latest analysis is online on our site, investors are resolutely turned towards solutions guaranteeing the ownership of their funds:
“Overall, cryptocurrency users seem to favor sovereignty and security, becoming increasingly reluctant to delegate their trust to third parties. The application of the adage “Not your keys, not your coins” is visible within the sector. The cypherpunk ethos gets stronger with every bear market and the one we just came out of was no exception. »
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Solution ? Decentralized exchanges
So, while CEXs are largely neglected by investors, decentralized exchanges are benefiting from them, as Prof. Chain. This is verifiable on the graph below, where we can see that the DEX-CEX ratio exceeds 21%, the highest point ever.
“Looking at CEX data and DEX activity, it can be inferred that the 2021 – 2023 bear market-induced bankruptcies (UST/Luna, Celsius, FTX/Alameda) have caused investors and speculators to s move towards more decentralized solutions. »
Figure 3 – Monthly decentralized exchange volume divided by centralized exchange volume (in percentage)
On the side of Total Value Locked (TVL) in DeFi, the latter has been more or less stable since the end of 2022hovering around $50 billion with a pronounced dominance of Lido, MakerDAO and Aave.
Figure 4 – DeFi ecosystem TVL
Note, however, that DEX usage and DeFi-related volumes have, overall, been greatly boosted by the “memecoin season” of recent monthsitself particularly encouraged by trading volumes around Pepecoin (PEPE).
👉 Read also – The Nansen company cuts 30% of its workforce due to the bear market
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Sources: Glassnode, The Block, Kaiko
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Passionate about the world of decentralized finance and the novelties brought by Web 3.0, I write articles for Cryptoast to help make the blockchain more accessible to everyone. Convinced that cryptocurrencies will change the future very soon.
Maximilien Prue
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