From April 2021 to April 2022, DEX saw an on-chain transaction volume of $224 billion, while CEX is $175 billion. Trading volume on DEX surpasses for the first time CEX 15 months ago and is a sign that they are now becoming the most popular method of trading.
On-chain trading volume on DEX vs CEX | Source: Chainalysis
The Chainalysis report covers various aspects of the decentralized market and will be released at the end of the month. The data platform states that, “DEX is now confidently the leader in terms of on-chain trading volume,” although the recent market crash has demonstrated that CEX is more resilient.
DEX dominance then reached its peak in June of 2021; that month, DEXs facilitated more than 80% of on-chain transaction volume. Today, their share of on-chain volume is more evenly split, with 55% on DEXs and 45% on CEXs. pic.twitter.com/D6JZ5VtkatJune 6, 2022
Last June was when DEX volume reached its peak, accounting for 80% on-chain trading volume. However, that performance has begun to fade, as transaction volume is now more evenly split between DEX and CEX. Currently, DEX is still marginally better with 55% on-chain trading volume.
DEX dominance depends on several factors
The report also notes that there is little difference in behavior between 10,000 senders ETH top on DEX and CEX. The most significant difference is the ratio ETH their on the CEX. 7% DEX user funds come from CEX, but 16% CEX user funds come from another CEX.
Chainalysis concluded that DEX dominance will depend on a number of factors, including: lower fees, regulatory scrutiny, and market mainstreaming.
DEX has certainly become a more prominent part of the market, especially with its liquidity provision, which offers attractive incentives. They also provide more flexibility and tie into the rest of the decentralized financial markets (DeFi).
However, regulatory oversight is becoming a potential threat, as lawmakers perceive these platforms to be less likely to be censored. Many jurisdictions already have plans to target unhosted (non-custodial) wallets and this could lead to some serious consequences for the market.