Decentralized Exchanges Lose Liquidity and Market Share – Kaiko
Date: 2023-07-24 Author: Karina Ziganova Categories: BLOCKCHAIN, BUSINESS
Traditional investors are willing to entrust their money to centralized exchanges due to the excessive complexity of the interface of decentralized counterparts
Weak liquidity, slow speed, and excessive complexity hit the market share of decentralized exchanges (DEXs). Bloomberg writes about this, citing data from the analytical firm Kaiko. According to published data, as of the end of June 2023, the market share of DEX platforms fell to 5%.
Monthly trading volumes on DEX exchanges have collapsed by 71% to $21 billion since January 2022, for comparison, centralized exchanges also have a significant drop (by 69%) in trading activity, but liquidity there is noticeably higher (amounted to about $429 billion).
Richard Gelvin, co-founder of the hedge fund Digital Asset Capital Management, believes that the interface remains the main problem of decentralized platforms. According to him, many traditional investors will prefer centralized platforms to DEX exchanges because of their ease of use. At the same time, Gelvin admitted that the developers of decentralized exchanges are trying to fix bugs as quickly as possible.
However, the interface and liquidity may not be the only obstacles in the way of DEX exchanges. According to analysts at audit firm PriceWaterhouseCoopers, decentralized platforms are still "in limbo" due to ambiguities around their regulation.
Despite the drop in liquidity, the attention to decentralized exchanges on the part of traders is still noticeable. According to the indicators of the analytical platform Token Terminal, the number of monthly active users on DEX exchanges has been growing steadily since 2020. In 2023, their volume most of the time was more than 1 million people per month.
Experts interviewed by Bloomberg admit that liquidity on DEX platforms may still grow. One of the triggers for the inflow of money is the arrival of large players from Wall Street on the market. Recall that at the end of June, financial giants Citadel and Fidelity launched their own decentralized exchange EDX Markets.
