Decentralized Crypto Platforms Still Waiting on Their Golden Age

Decentralized cryptocurrency platforms have seen their spot trading volumes plummet in the last year.

That drop, a Sunday (July 23) Bloomberg News report noted, stands in sharp contrast to the “golden age” crypto enthusiasts predicted after the collapse of FTX last year weakened trust in centralized platforms.

Instead, monthly spot trading volumes on decentralized exchanges fell 76% to $21 billion between January 2022 and June of this year, compared to the 69% decline for centralized crypto platforms, the report said, citing data from Kaiko. 

That same data shows the market share of peer-to-peer digital-asset platforms falling to 5% from a 2023 peak of 7% reached in March.

As Bloomberg noted, decentralized platforms appeal to people who want to trade crypto without going through intermediaries. However, these platforms are often held back by complex set-ups, slower speeds, and lower liquidity than what’s found on exchanges like Binance and Coinbase.

“Institutional investors typically find it difficult to trade on peer-to-peer exchanges, though their designs continue to improve and the platforms are still generally less than three years old,” Richard Galvin, co-founder at Digital Asset Capital Management, told Bloomberg.

The report also cites a crypto hedge fund survey by PwC that found that decentralized exchanges present compliance difficulties as they are unregulated. 

“The regulatory overhang is definitely a hindrance to these protocols,” said Townsend Lansing, head of product at crypto asset manager CoinShares International.

This isn’t to say that centralized crypto platforms are having an easier time. As PYMNTS wrote last week, Binance’s share of spot trading in the last year has fallen by 17 percentage points, from 90% to 73%.

The company — the world’s largest crypto platform — is seeing its market share decline as U.S. regulators place more pressure on the company, in the form of lawsuits by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).

Coinbase is also facing an SEC suit. Both companies have vowed to fight the agency’s charges.

“But is the SEC in the wrong, or has the crypto sector just gone too far a few too many times, leaving too many retail investors holding the bag as executives abscond with billions?” PYMNTS wrote earlier this month.

As noted here late last year, after a 2022 filled with fraudulent evaporations and disastrous bankruptcies, as exemplified by the FTX collapse, the SEC is likely feeling burned by the sector after listening to its “let us innovate” plea.