Investors diverge from CEX
Market data converges on a clear observation: in light of the bear market, and more precisely of this terrible year 2022, when leading players in the crypto ecosystem (FTX, Celsius, Terra, 3AC) collapsed, investors abandon centralized exchanges (CEX) in favor of decentralized exchanges (DEX).
Figure 1 – CEX trading volumes
Currently, about $5 billion is traded daily on centralized exchanges, a low that has not been touched since 2020. In addition to pure trading, we can also see that CEX is neglected when it comes to storing cryptocurrencies. A point that does not come as a surprise as investors fear a repeat of an FTX scenario.
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 peak of this metric. Since then, the number of BTC stored on CEX has continued to decrease.with a particularly noticeable decrease in November 2022 (decline 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 turning to solutions that guarantee the ownership of their funds:
“Overall, cryptocurrency users seem to prefer sovereignty and security and are increasingly reluctant to delegate their trust to third parties. The use of the saying ‘Not your keys, not your coins’ is visible within the sector. The cypherpunk ethos is becoming stronger for 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 benefit from them, as Prof. Chain. This can be verified on the graph below where we can see it 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 move towards more decentralized solutions.”
Figure 3 – Monthly decentralized exchange volume divided by centralized exchange volume (in percent)
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
However, note that DEX usage and DeFi-related volumes in general have, been greatly boosted by the “memecoin season” of recent months.itself especially encouraged by trading volumes around Pepecoin (PEPE).
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Sources: Glassnode, The Block, Kaiko