Peer-to-peer crypto platforms under pressure in falling market -TGN

Decentralized peer-to-peer crypto exchanges are under intense pressure as they witness a sharp drop in overall market share.

Peer-to-peer crypto platform market share has fallen to 5% from a peak of 7% in March in 2023, Bloomberg reported citing Kaiko data.

Decentralized exchanges saw monthly spot trading volumes drop 76% to $21 billion in June this year from January 2022, more than the 69% drop for their centralized rivals to $429 billion.

Previously, several from the crypto industry had predicted a golden era for P2P platforms such as Uniswap and dYdX following the collapse of the FTX exchange, which undermined trust in centralized platforms taking control of tokens.

Decentralized Exchange struggle to compete with centralized platforms

Decentralized exchanges are cited by many as an answer to corruption on centralized platforms. But they often fall short in terms of complex user interfaces, slower speeds and lower liquidity than their peers like Binance Holdings Ltd. or Coinbase Global Inc.

Richard Galvin, the co-founder of Digital Asset Capital Management, told Bloomberg that despite continued improvements in their designs and their relatively young age of less than three years, peer-to-peer exchanges remain challenging or infeasible for most institutional investors to trade on.

Significant efforts have recently been made to improve peer-to-peer exchanges. Uniswap, the leading decentralized trading platform, recently launched a protocol aimed at improving prices for clients by consolidating diverse sources of digital asset liquidity.

Meanwhile, blockchain company Vertex made waves earlier this year with the launch of its decentralized exchange, offering similar transaction speeds to traditional centralized platforms.

Monthly increase in active users on decentralized exchanges

Since 2020, decentralized exchanges, while facing trading volume challenges, have witnessed consistent increases in monthly active users, according to Token Terminal data.

The number of monthly active users exceeded 1 million users for a significant portion of this year.

This increase in adoption can be attributed to growing concerns about the stability of centralized platforms, particularly in light of FTX’s collapse due to allegations of extensive fraud last year, which subsequently led to increased scrutiny by industry regulators.

Crypto exchange giants Binance and Coinbase are also facing scrutiny from regulators around the world as they fight for their lives in the US.

Last month, institutional crypto exchange EDX Markets launched, receiving backing from leading companies such as Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp.