DEX Trading Volume is About to Drop Below CEX Volume for the First Time in Over a Year

Decentralized exchanges have been one of the success stories of DeFi, beating out their centralized counterparts last year.

Now, things are turning around.

The market share of decentralized exchanges (DEXs) has plunged to 55% from a record 80% in June 2021. That’s just marginally higher than trading volume on CEXs, according to a chart put out by Chainalysis. DEX trading volume climbed to as high as $240B at its peak, compared with approximately $100B in CEX volume at the time.

If the trend of the last year or so continues CEXs will overtake DEXs as the bear market deepens.

Granted, the comparison between transaction volume on both types of exchanges isn’t totally apples-to-apples — on-chain volume for CEXs refers to the value of the assets entering and exiting the exchanges, not specifically the trade volume which happens on off-chain orderbooks.

On-chain volume for DEXs is more intuitive — it’s the value of the assets being traded.

Still the value flowing in and out of CEXs is a decent proxy for how much volume is being traded on them.

The relative volume between the two types of exchanges has evened out, with DEXs still maintaining a lead. With companies like Robinhood implementing mobile-first access to DEXs like Uniswap, smart contract-based exchanges may be able to maintain their lead.

According to Chainalysis, DEX’s ability to keep their edge rests on a few factors.

First, DEXs must offer lower fees and fairer pricing than their centralized counterparts. Second, they must remain viable in the face of regulatory scrutiny. And third, DEXs must shift the public’s viewpoint to further blockchain-enabled capabilities like permissionless trading and self-custody.

Noticeably absent in Chainalysis’ report is any mention of liquidity mining or token incentives. The absence is in line with an overall trend in DeFi — with token valuations down, projects must win in the market like any normal business, rather than relying on temporary incentives to juice financial throughput.