CEX Trading Volumes Drop Before Legal Battles

The cryptocurrency industry has been marked with ups and downs since its inception. One of the most recent concerns is the decrease in CEX (Centralized Exchange) trading volumes. CEX trading volumes have hit a four-year low in the crypto market, without considering the impact of the recent lawsuits from Binance and Coinbase.

According to coinmarketcap, the total CEX trading volume was about $3.46 billion on July 11th, 2021, compared to $16.7 billion on the same day in 2018, when the crypto market was running at its all-time highs. This indicates a decline in trading volumes by 79.26% since then. The decline has been gradual, and a few factors have contributed to the lackluster trading volumes for CEXs.

One of the primary factors responsible for it is the competition and increased adoption of Decentralized Exchanges (DEXs). DEXs allow peer-to-peer transactions, unlike traditional CEXs that require centralized control and intermediaries. DEXs provide a more accessible and democratic platform for users to engage in direct trades, removing the need for an intermediary, which results in lower fees and quicker transactions.

Another factor is the shift in the market sentiment from the bull market to a bear market. The bull market is characterized by prices soaring to new highs, which then attracts more investors to the market. In contrast, the bear market is the opposite, with prices declining and discouraging new investors from entering the market. The crypto market has seen a significant slump recently, reducing the market’s appeal to potential investors.

The market sentiment also impacts the trading activity of existing investors. A bearish market reduces trading activity as investors remain hesitant to buy more coins when there is a risk of further price decline. On the other hand, a bull market attracts more traders, leading to increased trading volumes.

Regulatory changes have also attributed to the decline in trading volumes. Governments worldwide have been issuing regulations and guidelines for cryptocurrency trading, leading to stringent measures to curb money laundering, protect investors, and maintain overall market stability. The regulations have impacted trading volumes as CEXs are now becoming more vigilant in following KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures, which has led to slower transaction handling and longer processing times.

Furthermore, the decline is also a reflection of the overall decline in trading volumes for cryptocurrencies. Bitcoin has been hovering between the $30,000 and $40,000 range, lowering investors’ confidence in the market. Moreover, investors are also skeptical about the environmental impact of mining cryptocurrency, leading to hesitant investment. This, coupled with cryptocurrency’s volatile nature, has affected trading volumes in the market.

Contrary to the DEXs, CEXs have been experiencing a decrease in trading volumes, reducing revenue for them, leading to a loss of investor confidence. While exchanges need to adhere to regulatory guidelines, their overall mission is to provide value to their stakeholders, which includes generating profits and satisfying customers. The decline in trading volumes has caused several exchanges to suspend or cut back on operations, resulting in less liquidity and fewer trading opportunities for investors.

In conclusion, the decrease in CEX trading volumes has been a long-term trend which has been further accentuated by several industry factors. The DEXs have changed the paradigm in the crypto industry by providing a more accessible and decentralised platform for trading. With the market sentiment being bearish and regulatory changes impacting trading volumes, exchanges have to innovate, provide user-friendly services and shift their operations towards the direction of decentralisation. The industry must evolve to meet the ever-changing investor demands to remain relevant.