DEXs Volume Plunges by 68% In the Last 7 Months

The trading volume on decentralized exchanges (DEXs) has plunged by 68% in the last seven months. That’s according to a recent BanklessTimes.com data presentation. The site has revealed that the metric fell from $146.622B in March to $44.324B in September this year.

That fall has caught the attention of industry commenters, including BanklessTimes cryptocurrency expert Alice Leetham. According to her, the development is concerning for the entire crypto market. She held:

The decline in DEX volume suggests that investors are becoming more risk-averse to trading in the volatile crypto space. Additionally, it could lead to a decrease in their liquidity, increasing the difficulty and cost of exchanging tokens.

BanklessTimes crypto expert, Alice Leetham

What Does This Decline Mean for Retail and Crypto Investors?

Alice explained that DEXs are a key component of the decentralized finance (DeFi) ecosystem, providing users access to DeFi protocols and applications. Consequently, their falling transaction figures could indicate crypto investors’ waning interest in that space.

She insisted that these declining DEX capacities are a negative sign for the digital assets sector as a whole. These platforms are central to the crypto ecosystem by enabling the trustless exchange of crypto assets.

As such, their contraction suggests that there is less liquidity in the crypto market and that traders are finding it more difficult to execute trades. This could lead to higher transaction fees and wider spreads.

Factors Behind the Decline in DEX Volume

Alice affirmed that several factors could have contributed to the decline in DEX volume. First off, the crypto market has been in a bearish trend for most of the past year. That has led to a petering out of overall investor confidence and a decrease in trading activity on both centralized and decentralized exchanges.

Secondly, there are growing regulatory concerns around DEXs in several jurisdictions. Many authorities view DEXs as conduits for illicit activities such as money laundering and terrorist financing and are grappling with reigning them in. Accordingly, the uncertainty surrounding their legality has deterred some investors from using them.

Long-Term Implications of the Continued Decline of DEX Volumes

It’s concerning that the continued nosediving of DEX volumes could hamper innovation in the DeFi sector. As stated before, DEXs are a critical component of the DeFi ecosystem. Therefore, their plunging volumes suggest a shrinking demand for the sector’s products and services, hence less motivation to innovate.

Second, the fall could lead to increased centralization of the crypto market. DEXs are key to decentralizing cryptocurrencies; however, their dwindling volumes convey that there is a shift towards centralized exchanges.

Finally, this plunge could slow the adoption of digital currencies. The falling off in DEX volume implies that they haven’t evolved in step with the dynamic crypto market. So, they have to do more to regain the trust of their users.