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In April, centralized crypto exchanges experienced a decline in trading volumes for the first time in three months, following a hot first quarter that cooled off digital assets.
Blockchain data provider Kaiko reported that trading volumes on centralized exchanges fell to around $500 billion, nearly half of March's volumes, making it the lowest volume month this year. Kaiko added that volumes had reached pre-FTX collapse levels until April's decline but markets remain above 2020 levels in terms of trade volumes. Despite this, the crypto market is significantly larger than it was before the 2020 bull run, Kaiko noted.
Lars Ox, a blockchain analyst, stated that legitimate centralized exchange spot volume decreased by 43.8% to $400.5 billion in April, with Binance, the market leader, having a dominance of 71.6%, and its 24-hour trading volume significantly larger than its nearest rival, Coinbase, according to CoinGecko. Lars0x attributed the majority of the decrease to Binance adding back fees on BTC pairs.
The decrease in centralized exchange trading volumes follows the retreat of digital asset markets from their 2023 highs in mid-April. Total market capitalization hit an eleven-month high of $1.34 trillion on April 16, but markets have declined 7.5% to $1.24 trillion since then. Since the start of the year, crypto markets have gained 50% but remained largely range-bound for the past six weeks or so. Analysts have suggested that the correction is likely to continue as markets were somewhat overheated for the first quarter of the year.
The Decline in Centralized Exchange Volumes Suggests a Shift Towards Decentralized Options
Binance, which saw its Bitcoin balance increase by over 50,000 BTC, approximately $1.5 billion, in a month, had a 24-hour trading volume of around $10 billion in April, significantly larger than Coinbase's $1.1 billion. Meanwhile, Coinbase's app downloads have also declined in recent months as trading volumes dwindle in the sideways market, according to Yahoo News, citing research from Apptopia, which tracks app usage metrics. Tom Grant, the vice president of research at Apptopia, suggested that the shrinking app usage paints a bearish picture for the company.
The recent decline in centralized exchange trading volumes could be seen as a sign that investors are increasingly looking for opportunities outside of centralized exchanges, such as decentralized exchanges (DEXs), which have grown significantly in popularity in recent years. DEXs offer greater transparency and security, allowing users to retain control over their assets and avoid the need for intermediaries. However, the trade-off is that DEXs tend to have lower liquidity, making them less attractive to large institutional investors. Nevertheless, the rise of DEXs and other decentralized finance (DeFi) platforms suggests that the crypto market is becoming increasingly decentralized, with more options for investors to choose from.