August 17, 2022

Decentralized Exchanges Exploded on January 2021, Registering a New ATH in Volume

3 min read

The usage of decentralized exchanges has actually been increasing over the years. With cryptocurrencies making their way into the business world, activity in this sector is escalating.

Unlike a centralized exchange, a DEX (Decentralized exchange) has no main entity accountable for its operation. Rather, traders rely on a wise agreement and the entire platform operates on the blockchain– usually Ethereum.

This makes them slower and inefficient, however traders happily welcome this short-lived issue due to the fact that, among many benefits, they don’t require to abide by KYC requirements and other policies and norms next to what is composed on the wise agreement, token listings is much easier, and yield farming makes them fascinating.

Decentralized Exchanges Are Booming

The number of decentralized exchanges increased, therefore did the activity on each of these brand-new platforms. According to Dune Analytics stats, throughout January 2021, trading volume on decentralized exchanges exceeded the $63 billion mark for the first time ever.

This record is more than double the mark recorded throughout September 2020, when trading volume on DEXs came extremely close to touching $30 billion. This took place at the peak of the DeFi boom.

According to Dune Analytics data, Uniswap is the undisputed leader in the sector, with over $25.8 billion traded in August. This figure contrasts somewhat with research study from The Block, which approximates that more than$30 billion were relocated that month. The Block’s research system puts the record at $60.9 billion.

The runner-up exchanges are SushiSwap, 0x, and Bancor. Sushiswap controls nearly a quarter of all trading volume on decentralized exchanges, 0x holds 7.25% and Bancor 7.1%.

The Dune Analytics dataset does not take into consideration statistics from the popular 1inch exchange– which spiked over 1000 % just after is noting. The firm did not disclose the reasons behind this omission. Nevertheless, it is most likely due to the short time the protocol has been in operation.

Centralized Exchanges Can not Say The Same Thing as DEXes

Another aspect worth considering is that Bitcoin supply on centralized exchanges decreased to lows not reached in the last 2 and a half years.

Information assembled by Glassnode shows a practically inversely proportional relationship in between the evolution of the Bitcoin price and the number of tokens saved on exchanges.

Glassnode shows that from April 2020 to date, centralized exchanges have actually seen their Bitcoin inventory drop from nearly 3 million BTC in custody to just under 2.4 million.

This drop matches up exactly with the preliminary recovery Bitcoin had after the market crash of March 2020, which took it on an uptrend to its new all-time high above $40k per token.

One reason behind this drop might be that the rate increase caused a greed impact among traders, who declined to offer in the expectation that their tokens would value a growing number of with time.

Institutional financial investments must likewise be added to this. More and more firms are purchasing big amounts of Bitcoin to hodl for long periods of time. This causes a lack in the markets that improves up prices to rebalance the books.

However, with this increase of decentralized exchanges, it can likewise be important to follow Ethereum statistics and see new market trends.