Gain insights into the true condition of the cryptocurrency market by conducting a health check based on exchange activities.
Main concept:
Gain insights into the true condition of the cryptocurrency market by conducting a health check based on exchange activities. This analysis examines the overall health, size, and activity level of the current crypto market, considering both centralized and decentralized exchanges. It encompasses factors such as trade volume, market size, and regional/coin coverage.
The top 20 exchanges contributed $1.67 trillion in total spot trade volume in Q2 2023, reflecting a significant 36% drop compared to the previous quarter. This decline indicates a notable slowdown in market activities, followed by Q1’s retaliatory active market trading activities ($2.6 trillion) largely driven by Bitcoin's price doubling in Q1 2023.
The present trade volume closely resembles the market conditions observed during the recovery phase after the FTX crash.
Binance maintains its dominant position in the market throughout H1 2023, with a total spot trading volume share of 59.99%, remaining relatively stable compared to the same period last year.
The Top 5 Exchanges accounted for c.85% of the total spot market volume, allowing the liquidity and 24-hour trade volume to be positively skewed towards the leaders, among which Binance, Coinbase and Kraken maintained the highest Average Liquidity score >700.
In terms of market offerings, the current market maintains a healthy number of trading pairs and available coins, and has witnessed a continuous increase in new listings.
Binance has continued to dominate liquidity in the large-cap space, while its new listings focused on high-quality mainstream coins. Comparing the new coins added as a proportion to its total listings, BitForex and Bitget are among the most active in adding new coins during the memecoin season through April to June 2023.
Among the disclosed exchanges, Binance ($57 billion), OKX ($10 billion), and Bitfinex ($10 billion) exhibit the highest amount of Proof of Reserve Assets. Bitcoin and stablecoins make up the majority of reserve assets for most exchanges.
The total amount of Proof of Reserve assets has remained relatively stable over the past quarter. However, the recent market FUD has led to capital outflows from Binance, and the exchange’s corresponding proof-of-reserve assets reduced by $20 billion as a result.
An encouraging sign within the industry is that despite the substantial outflows from the Binance exchange in Q2, the exchange still maintains a healthy amount of Proof of Reserve assets, consisting of a safe and diversified composition of coins.
H1 2023 shows that the majority of exchange tokens have achieved net positive returns. However, most of them were unable to outperform Bitcoin (+182% YTD).
The peak of trading volume in the top 15 DEX occurred in March of this year, and it remained consistent throughout Q2. In Q2, the total DEX volume reached $189 billion, representing a 24% decrease compared to the total of $249 billion in Q1.
Uniswap maintains its dominance in the DEX market, capturing a market share of 57.5%. Its monthly volume has been on par with Coinbase's spot volume. The top 3 DEXs Uniswap, Pancake, Curve accounted for c.82% of the total market in H1 2023.
While CEX continues to be the preferred choice over DEX solutions, the DEX to CEX ratio has increased to around 1:8.
This can be attributed to several factors, including the recent advancements in DEX products, market concerns regarding CEX driven by regulatory developments, a more favorable environment with lower gas fees, and a higher proportion of crypto-native participants given the current market conditions.
Throughout H1 2023, approximately 80% of the DEX trade volume happened on Ethereum and its Layer2 chains. However, in Q2, BNB has been rapidly catching up and gaining a larger share of the DEX trading market.
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