Despite decentralized exchanges (DEXs) emerging as pivotal players in the crypto world, recent reports indicate a significant shift in their market share relative to centralized exchanges (CEXs). According to the latest analysis by crypto analytics firm Kaiko, DEX trading volumes experienced a notable increase in November, reaching $29 billion.
This resurgence marks a recovery from the multi-year low observed in September, yet it remains a stark contrast to the all-time high of approximately $124 billion recorded in May 2021, according to Kaiko.
The Shift In Crypto Market Share: DEX Vs. CEX
The rise in DEX trading volume, while substantial, seems less influenced by major platforms such as Uniswap and Curve on the Ethereum blockchain and PancakeSwap on the BNB Chain, which have shown a relatively unrushed growth pace.
The fluctuating dynamics between decentralized and centralized exchanges are evident in the market share data. In November 2020, the crypto industry reached its peak public interest in decentralized finance (DeFi), with DEXs capturing a 10% market share of the overall exchange volume.
However, this figure has seen a steady decline, dropping from 5% in January 2023 to just 3% in November of the same year. This decrease in market share becomes more apparent when examining specific exchanges.
For instance, Uniswap, the largest DEX, holds a market share of about 40% relative to Coinbase, a leading CEX. This comparison, while showing Uniswap’s significance, also highlights the gap that still exists between decentralized and centralized exchange models.
Meanwhile, Binance‘s spot market share has declined from 55% at the start of the year to 30.1% this month, according to CCData,
Binance’s Declining Share And DOJ’s Intense Oversight
The decline in Binance’s spot market share is a critical factor to consider. This change, appears to be particularly driven by regulatory challenges and the legal issues faced by its former CEO Changpeng Zhao.
Recently, the US Department of Justice (DOJ) gained extensive oversight over Binance following the $4.3 billion settlement. Former SEC Chief of Internet Enforcement John Reed Stark shed light on this development in an X post, noting that the US government now holds significant control over Binance’s operations.
Breaking News: A Binance Double Whammy. 1) Newly Unsealed US DOJ Filings Could Mean the End of Binance; and 2) SEC Files Supplemental Pleading Against Binance, Strengthening the SEC Binance Lawsuit Exponentially
There’s been a flurry of newly released Binance-related filings… pic.twitter.com/igN2I9Y7cP
— John Reed Stark (@JohnReedStark) December 9, 2023
This level of scrutiny, described as unprecedented, means that Binance is required to implement rigorous compliance measures across its policies, procedures, and internal controls, impacting both its customer and third-party relationships.
Featured image from Unsplash, Chart from TradingView