Activity on decentralized exchanges has increased recently due to retail traders seeking earlier access to new crypto assets.
Decentralized exchanges are undervalued and gaining traction, with volumes reaching all-time highs.
These are the findings of Messari researcher Kunal Goel who said that centralized exchanges (CEXs) are listing tokens too late in a post on X on Aug. 13.
He added that they’re becoming a “dumping ground for VCs,” and retail will learn sooner or later stop participating in this dynamic.
DEXs give retail traders a better chance to buy new tokens as they’re listed early, he said.
DEXs Could Improve
The researcher said there were several advantages that DEXs have over CEXs. These include an improved on-chain user experience in terms of speed and cost, as well as better wallet integration and reliability.
A DEX doesn’t stop during times of market turbulence whereas centralized exchanges, Coinbase being the prime example, can suffer outages during peak volume periods. However, DEX token values have not reflected these advantages, and many of them have slumped to bear market levels.
Goel said that this could change for several reasons. Firstly, DEXs leak Miner Extractable Value (MEV), so retaining this would give them additional revenue.
New tokenomic models to capture and distribute cash flows are being developed, and the potential integration of features like perpetual trading could also give DEXs a boost. He concluded with a prediction that all assets will be tokenized on DEXs in the future.
“DEXs are fundamental financial primitives and maybe crypto’s most successful product. Currently, they service circular crypto speculation, but in the future, all assets will be tokenized and on DEXs.”
DEX Volumes Up in 2024
According to DeFiLama, daily DEX volume is around $5.25 billion. It has more than doubled since 2023 when average daily volumes were closer to $2 billion. In terms of market share, DEXs currently have around 21% of the crypto exchange market compared to their centralized counterparts.
Uniswap is the largest DEX, with a daily volume of $1.48 billion and a 28% market share. PancakeSwap is second, with around $600 million in daily volume and an 11.6% share of the DEX market.
CoinGecko has a slightly lower total daily volume figure for decentralized exchanges at $4.65 billion, but it also lists Uniswap as the market leader.
It reports a DEX token market capitalization of $14 billion, which represents just 0.6% of the total crypto market.