Assessing the Centralized Exchanges as They Record Sharp Dip in Trading Volumes

According to market data source Kaiko, trade volumes on centralized crypto exchanges (CEX) declined substantially in April after three consecutive months of increase. April had the lowest monthly volume in 2023. Volumes had practically dropped from March when they peaked in 2023.

Kaiko said that April’s drop erased the gains earned in March when pre-FTX levels were reached. However, it added that overall volume remained significantly higher than during the pre-2020 bull run period.

Binance and Coinbase drove the decrease in total CEX trading volume. According to CoinGecko data, daily volume on Binance, the world’s biggest crypto exchange, fell sharply in April after reaching all-time highs in mid-March.

This drop was mostly caused by Binance discontinuing its no-fee trading offer on March 22. According to a previous analysis by Kaiko, zero-fee transaction volume accounted for over 66% of all activity on Binance till mid-March 2023.

Furthermore, trading volumes on US-based exchanges have been steadily declining. Coinbase, the biggest exchange in the United States, recorded volumes of $1.1 billion in the past 24 hours, down from a high of more than $3 billion in mid-March.

It is worth noting that Bitcoin [BTC] holdings at US-based exchanges have fallen precipitously since the beginning of 2023. The increased scrutiny of US authorities pushed investors to look into offshore trading venues. This might explain the decline in CEX activity.

According to popular views in the crypto ecosystem, diminishing activity on CEXs is due to investors’ desire for self-custody and shift to decentralized exchanges (DEXs), which was visible after the collapse of FTX.

The present trend, however, does not corroborate this story. According to DeFiLlama statistics, monthly trading volume on DEXs fell 44% in April. According to CoinMarketCap statistics, the entire market valuation of the crypto industry has dropped from $1.28 trillion in mid-April to $1.19 trillion at the time of writing.

Recent research also found that digital asset investment products had net outflows for the second week. This suggested that the decline in CEX volume was more directly related to the current market correction than to other reasons.