The FTX collapse triggered a wave of uncertainty against centralized platforms. The cryptocurrency community witnessed billions of users in outflows from these centralized exchanges, who began rushing to secure their treasured assets.
Meanwhile, decentralized exchanges (DEXs) have received a large inflow of users who have now understood the core concepts of Cryptocurrency are indeed decentralization and financial privacy.
On-chain data reveals in November 2022, the monthly DEX volume rose to the tune of 110%. Soaring from a trade volume registered in October, it went from $50.8 billion to $107 billio, following FTX’s bankruptcy, triggering a major crypto-outflow from exchanges.
Big decentralized exchanges as well as small ones benefitted from FTX’s epic downfall, The chart-topping DEX, Uniswap V3 (a DeFi platform), recorded a monthly trading volume spike of 120%.
Next is PancakeSwap, with a 56% spike in a monthly trading volume spike.
Customers must already own digital assets to utilize a DEX, and they do not deal with banks in any way. The user experience (UX), though, is slightly complex than that of centralized exchanges.
Nevertheless, users can compensate for what they lose in terms of UX convenience with security, and this is due to DEXs offering self-custody options.
Admittedly, the development of cryptocurrency was prompted by centralized interference. There are some entities that think centralized exchanges will still remain dominant in the long-run, and it’s none other than the global investment bank, J.P. Morgan.
J.P. Morgan expects that despite the community expecting a significant movement in favor of decentralized exchanges, centralized exchanges would continue to account for a majority of global digital asset trading volumes.
DEXs’ transaction speeds, assets’ pooling, and order-traceability features could delay institutional interest, per J.P. Morgan strategists.
Also, with no limit order or stop-loss features in DEXs, they depend on price oracles to source data from centralized exchanges, J.P. Morgan analysts opine.
DEXs’ are also prone to hacks, exploits, and systemic risks, requiring over-collateralization. Their automated liquidations feature is also an impediment, delaying their grand-scale adoption, J.P. Morgan analysts reason.