One would expect the bearish market conditions and FTX kerfuffle to turn people off from using centralized exchanges. So far, that is not happening, as November 2022 saw a high overall volume. That may signal a growing interest in cryptocurrencies, which could be beneficial.
Centralized Exchanges Continue To Thrive
One failing company should not turn off people from using any centralized exchange. The demise of FTX is a dark page in the history of cryptocurrency. It unfolded due to human error and greed, a recurring pattern when centralized exchanges become defunct. Unfortunately, history will continue to repeat itself in the future. Even the focus on proof of reserves may not change that narrative.
What is remarkable is the trust people continue to put in these CEXes. New research by Kaiko confirms the overall trading volume on centralized exchanges increased in November. That is despite growing exchange outflows. More people take self-custody seriously (for now), and one can hope that trend continues forever. However, CEXes remain a crucial gateway into crypto for those with fiat currencies.
During November 2022, trading volumes across CEXes grew by 23%. That is remarkable, as the markets got spooked due to the FTX shenanigans. However, many users seemed to emphasize using Binance, the biggest CEX. Another 30% increase in trading activity will only strengthen its position. It is also the only notable player generating such high volumes that has remained free from controversy, hacks, thefts, and mismanagement.
Interestingly, Kraken and Coinbase saw an overall increase in trading activity. Kraken is rarely considered a top-tier crypto exchange despite a stellar reputation and overall enjoyable trading experience. Coinbase has seemingly disappeared into the background a bit in recent years, even though it remains a prominent exchange. On the other hand, smaller centralized exchanges saw volumes decrease. No one should ever risk their funds with unknown companies with little or no track record.
Surging Interest In DEX Tokens
It will take a long while before DEXes can overtake centralized exchanges in trading volume. However, there has been a strong increase in demand for exposure to DEX tokens. That includes assets like SUSHI, UNI, DYDX, and GMX. They all noted a decent performance since the FTX collapse and outpaced Bitcoin and most other assets. That doesn’t mean all DEX tokens perform well, as the derivatives-oriented platform assets have plummeted.
That said, it may be a temporary market reprieve for DEXes. As trading volume on centralized exchanges soars again, DEXes will struggle. That will reflect badly on the tokens, leading to more market volatility. The markets remain very fragile and further setbacks remain plausible in the final weeks of 2022.
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