Crypto Traders Shift Towards DEX Platforms as Trust in Centralized Exchanges Dwindles

Friday 10 July 2020, 7:00 AM AEST - 4 months ago

The cryptocurrency market is home to thousands of cryptocurrency exchanges — most of them wholly centralized and prone to hacks, mishandling of client funds, and outright exit scams. 

While centralized exchanges such as Coinbase, Binance, and Bitfinex have dominated crypto market volumes over the last decade, the next generation of decentralized exchanges, or DEXs, are slowly winning over security-conscious traders and investors.

Cryptocurrency price and market capitalization platform CoinGecko released its Q2 2020 Quarterly Cryptocurrency Report on July 9, revealing insight into the latest trading habits of cryptocurrency investors — decentralized exchanges are gaining traction.

Centralized Exchanges Lose Volume as DEXs Gain

Data revealed in CoinGecko’s report indicates that spot volume on major centralized crypto exchanges such as Binance have decreased by $324 million, or 7 percent. Both Binance and Bitfinex, two of the largest centralized crypto exchanges, experienced a significant reduction on total spot trading volume in the first half of 2020.

The apparent reduction in spot trading volume on centralized exchanges, however, has been balanced by a significant increase in trading volume on decentralized exchange platforms.

Q2 2020 saw an increase of 56.1 percent in trading volume on DEX platforms, with decentralized exchanges such as Uniswap V1 experiencing an increase of 152.4 percent.

Bitfinex Embroiled in Court Case Over Mishandled Client Funds

The reduction in major centralized crypto exchange volume is driven, in part, by continuous hacks and mishandling of user capital. Earlier this week, a New York State appeals court ruled that the exchange must face claims that it hid the loss of commingled client and corporate funds.

Companies related to the Bitfinex exchange platform are accused of hiding over $800 million in both client and corporate funds.

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