Three reasons for the growth in trading volume on the DEX-exchanges
Since Bitcoin overcame the psychological mark of $ 5000, the market has revived and, as a result, trading volumes have grown not only on ordinary trading platforms, but also on decentralised crypto exchange. And there are three reasons for that.
According to the report of the analytical company Diar, in 2019, April was a record month in terms of
trading volumes on decentralised crypto exchange (DEX) and exceeded $ 100 million mark.
However, these results are far from the highs of last year. In May 2018, the volume of trading on DEX reached $1.6 billion, followed by a rapid fall, which stopped at the level of $65.5 million in January 2019. This period of “crypto winter” was accompanied by a massive sale of crypto assets and a fall in their value.
What's safer: DEX or traditional crypto exchange
The surge in trading volumes on DEX is primarily due to the demand for safer methods of crypto-trading. After all, the story of the missing $145 million on the Canadian trading platform Quadriga alone would be enough. In total, last year alone, hackers stole more than $1 billion from a crypto exchanges.
“Sending your bitcoins to the stock exchange, you should say goodbye to them in your mind, as those are no longer your assets. Those are stock exchange assets. The crypto world knows a lot of cases involving exchanges’ burglary, trading bots and a number of other vulnerabilities. The most notorious one is Mt. Gox, whose investors lost a considerable amount of money,” explains Vladimir Denisenko, LetKnow.News analyst.
According to him, in order to protect themselves, traders are looking for alternative trading methods, one of such methods is trading on DEX-exchanges.
“You have the opportunity to make transactions without transferring private keys to a third party, thereby, without being exposed to the risk of loss of assets. This is one of the reasons for the increase in the volume of such exchanges,” says the analyst.
However, with the revival of the market, trading volumes increased on centralised exchanges as well, as confirmed by data from analytical resources. This is the second reason for the increase in trading volumes on DEX.
In addition, apart from a more secure method of crypto-trading on DEX when compared with centralised exchanges, they also give a clearer picture of the liquidity of the trading platform. After all, such a level of “pumped” volumes, as on centralised exchanges (about 90%), is impossible.
Binance sets a new trend on DEX
Another reason for the increased attention to decentralised crypto exchanges is the launch of Binance DEX on its own Binance Chain
blockchain. Although the trading has not yet begun, among the tokens added, you can already find coins from the BNB Binance Chain Native Token project, Mithril and NOW Token.
“In the near future, trade pairs on DEX will continue to appear with the tokens of the projects that will move to Binance Chain. For example, recently there was listing of Mithril and ChangeNOW tokens,” explains Gleb Kostarev, Binance representative in Russia and the CIS.
As you can see, Binance tracked the demand for decentralised solutions among crypto traders and offered its own solution. Thanks to this, the crypto exchange managed to keep its users.
“You do not want to store your
cryptocurrency with us? Please take a decentralised solution. I think this is a very good move from the exchange. In this way, they keep their audience,” says LetKnow.News analyst.
Binance, in his opinion, may end up being a trendsetter in this direction. And many centralised crypto exchanges may follow the steps of Changpeng Zhao’s platform. It is worth remembering the story about IEO (Initial Exchange Offering). Less than a month later, other crypto exchanges picked up the Binance initiative and began to conduct crowd sales on their sites.
“We need to remember the main rule: “demand creates supply”. If the demand for such solutions grows, we will observe the opening of more and more new exchanges of this kind,” says Vladimir Denisenko.
According to Gleb Kostarev, the trend will indeed continue to gain momentum, and other exchanges will also launch their own DEX.
“Another question is how much more popular decentralised exchanges will become than the centralised ones, since their use most often presupposes the existence of a certain experience in the field of cryptocurrencies,” says a Binance representative.
While the full-fledged trading at Binance Dex has not started yet, interest from crypto traders in decentralised sites is only growing. Against the background of the frequent attacks of traditional crypto-exchange, investors choose security, which confirms the increased growth in trading volumes on DEX platforms.
In its turn, for a crypto exchange, the creation of a decentralised division is a strategic move in the business conduct, since in this way the platform does not lose its audience and can satisfy the demand of all its customers. Therefore, it is likely that other crypto exchanges will repeat the Binance experience and will be developing in the same direction.
The author: Annabella Lapshyna