This will be an interesting trend to watch in 2024:
DEXes seem to be closing the gap on centralized exchanges. It has been one of those silently happening shifts, but the numbers do not lie.
Looking at the data provided by DeFiLlama and CoinGecko, I am struck by this: in comparison with February, when DEX trading volume made up 4.6% of the total crypto trading volume, it went way more than 7% in August. In other words, in six months, it more than doubled its market share. For me, this says everything about where the crypto community is headed.
Well, I believe there are a few factors driving this trend. First off, it's common for meme coins or other niche assets to find their first footing on DEXs before making it onto the big centralized exchanges. This allows DEXs to have a leg up in capturing the hype of new, hyped tokens. Besides, I know how much better the user experience of decentralized platforms has become.
With lower fees and faster transactions, using a DEX is slowly becoming less headache-inducing for the average trader on some networks like Solana and Ethereum L2s.
The raw numbers are impressive, though. DEX volume came in at $133.5 million in January and $179.5 million in August. That is a meaty 34% increase. I'm not surprised that both centralized and decentralized trading saw extremely high spikes in March when Bitcoin reached new highs. Crypto enthusiasm tends to come and go with Bitcoin's fortunes.
I'm particularly interested in how centralized exchanges may soon move on-chain. Smart move, if you will, to decentralize ahead of time instead of letting someone disrupt your business. We already see this playing out through Base and BNB Chain. Wouldn't be shocked to see this accelerate in the upcoming years.
One puzzling aspect is the slight dip in DeFi market cap dominance this year, despite the rise in DEX volumes. It dropped from 4.47% at the start of the year to 3.86% now. I'm really not sure what to make regarding this discrepancy, but boy, it's definitely on my radar now.
What's most exciting about DEX growth is democratization in finance. The frontier of such a platform may be opened for trading and liquidity provision to anybody if they are connected to the internet, which will not require opening a bank account and hopping through verification at centralized exchanges.