The cryptocurrency industry is booming, attracting more users every day. But with this growth comes a crucial choice: where to buy, sell, and trade your digital assets? The two main contenders are Centralized Exchanges (CEXs) and Decentralized Exchanges (DEXs), each with distinct features and benefits.

This report cuts through the confusion, providing a clear and concise comparison of CEXs and DEXs. We’ll dive into statistics to reveal their market share and potential, analyze their strengths and weaknesses, and discuss the factors driving the rise of DEXs.

By understanding the nuances of each exchange type, you can make informed decisions about your cryptocurrency journey. Dive in.

Overview of Decentralized Exchanges (DEX): A January Analysis

In January, DEX exchanges saw a notable 10% drop in valuation compared to December, signaling a shift in investor interest and a rise in digital assets outflow. The market’s increased volatility impacted inflow and outflow volumes, resulting in a decrease of more than -5%, indicating investors’ inclination to hold onto their digital assets.

Total Value Locked (TVL):

Despite crypto price volatility, the Decentralized Financial (DeFi) system exhibited growth, soaring from $117.54 billion at the month’s start to $121.435 billion by January 31, marking a 3.313% Month-on-Month (MoM) increase.

Within this sector, various subparts displayed mixed sentiments and volatile price actions. Lower cap chains outperformed top chains in monthly gains, with some experiencing returns exceeding 2X in valuation.

DEX Volume Analysis

Entering 2024 with high volatility, the crypto market witnessed substantial price fluctuations. Examining the Month-on-Month (MoM) scenario, DEX volume registered a 13.8596% decrease, dropping from $84.49 billion at the beginning of the month to $72.78 billion by month-end.

Among the top five DEXs, Ocra faced the highest loss, plummeting by 34.081%, PancakeSwap followed with a 16.458% loss, and Uniswap and Maker PSM recorded corrections of 7.746% and 7.14%, respectively. Conversely, Curve maintained stability, posting the least loss at 2.941%. Collectively, other DEXs experienced a 32.023% decline, marking a challenging start to the year.

DEX Share Volume:

Despite a volume drop, Uniswap secured the highest market share among the top five, surging from 57.63% to 61.71%, a notable 4.08% increase. Curve showed resilience with a 0.52% rise, making it one of the two DEXs with a positive month.

Following this, Curve has displayed a rise of 0.52% in the chart, making it one of the only two Decentralized exchanges (DEX) to record a positive month in the market for this subpart.

On the other hand, Orca has recorded the highest correction among the top five exchanges, with a loss of 2.73% in value, from 11.59% at the month’s start to 8.86% during the month-end. Other DEX exchanges recorded a loss of 1.68% Month-on-Month (MoM).

DEX To CEX Spot Trade Volume:

DEX to CEX Spot trade volume is the monthly Decentralized (DEX) volume divided by the Centralized exchange (CEX) volume to calculate the percentage. The calculation includes the top exchange of both parts.

The DEX to CEX spot trading volume has recorded a decline in volume during the first month of the year by 0.18%, from 7.88% to 7.70%, which was recorded on 31st January.

DEX Mechanism Volume Share:

Understanding the mechanisms within Decentralized Exchanges (DEX) provides valuable insights into the market. The DEX mechanism volume share encompasses the Constant Product Conservation Function (CP), Hybrid mechanisms combining different approaches, and Central Limit Order Books (OB). Here’s a breakdown of their total volume share.

• Constant Product (CP) subpart witnessed a rise from 78.21% to 81.5%, marking a substantial 4.206% increase.
• Order Book experienced the highest surge, jumping by 14.772% from 0.88% to 1.01% in the past month.
• Hybrid mechanisms, however, faced a downturn, recording a loss of 16.355% during the same period.

Centralized Exchange Overview (CEX):

Centralized exchanges grappled with massive fluctuations in valuations due to increased price volatility, culminating in several major exchanges ending the month in the red. Notably, Binance, under persistent regulatory pressure throughout 2023, exhibited a significant fall in the initial month of the year.

Proof-of-Reserve (PoR):

PoR’s current valuation stands at $71.388 billion, with Bitcoin dominating token allocation at 34.22%, followed by USDT at 26.29%. Ethereum secures the third spot with a share slightly above 10% (10.23%), while BNB and AETH hold 4.19% and 2.62%, respectively. Other tokens collectively hold 22.46%.

The above table consists of the top five exchange reserves of the industry with Binance dominating the other tokens with an aggregated balance of $27.9 Billion which sums up to a total of 39.082% of the total valuation.

The OKX exchange stands second with a balance of $5.62 Billion, followed by Deribit and Crypto.Com with a value of $1.51 Billion and $1.29 Billion respectively. Bitstamp stands fifth with a value of just under $1 Billion at $970 Million.

Revenue Insights

Centralized exchanges reported 4 out of 7 green days, 2 out of 7 red days, and 1 neutral day on the daily Profit and Loss (P&L) over the past week. The highest single-day P&L gain occurred on 29th Jan at $1.644 billion, contributing to a cumulative P&L of $1.523 billion.

However, the crypto industry concluded the month with a red day, recording a loss of $1.649 billion in daily P&L and a cumulative gain of $298.335 million in valuation.

Inflow and Outflow Analysis

The crypto market experienced significant volatility, leading to substantial fluctuations in the values of major cryptocurrencies. Bitcoin exchange inflow averaged 40,349.290 daily for January, with the highest inflow recorded on 12th January and the lowest on the 21st.

Bitcoin exchange outflow averaged 40,389.870 daily, indicating a minor increase in total volume. Similar to the inflow, the highest outflow occurred on 12th January, with the lowest on the 21st.

Exchange Volume Ranking

Examining top cryptocurrency spot exchanges, Binance secured the top spot with a score of 9.9, an average liquidity of 886, and 400 supported coins. Coinbase Exchange followed with a score of 8.4, average liquidity of 734, and 239 coins despite fewer weekly visits. Kraken, KuCoin, and Bybit rounded out the top five with their respective scores and average liquidity.

Conclusion

The Decentralized exchanges (DEX) are still in an early stage as they roughly hold 15% of the total market share. Further, the rising volatility in the industry and constantly changing rules and regulations have started pushing investors toward the world of DEXs.

Although both exchanges have their own pros and cons in their respective fields, it is highly recommended to place your trades with caution as exchanges are not liable for any transfers made by the crypto holder.