2020 has been dubbed the year of DeFi due to the unexpected surge in DeFi protocols and the over 1,000% increase in DeFi trading.
This pump, however, is on the decline as decentralized exchanges (DEXs) recorded a reduction in trading volume. October brought about a reduction in the DeFi surge of 2020 Q3. However, DEX trading volume is still higher than that of 2020 Q2.
In 2020 Q3, DEX volume skyrocketed over 1,000%. Trading volume was estimated to reach as high as $42.6 billion with top DeFi protocols like Uniswap and Sushiswap leading the way. According to TokenInsight, this increase was approximately 1,132% higher than the 2020 Q2 data.
BTC Price Increase
October 2020 saw a decline in DEX trading volume. This decline has been linked to the increase in Bitcoin (BTC) price. Interestingly, the crypto, just last week, reached a 2020 all-time high of $15,950. Bitcoin, according to Coingecko, is currently trading at $15,736.82. A huge feat since, as of January 2020, it was trading at $9,501.38.
Analysts have linked the Bitcoin price increase to the drop in DEX trading. The pump in BTC price has once again pulled traders’ attention back to the crypto.
Four DEXs Fueled the Boom
The decentralized finance (DeFi) boom in July alone was recorded to be as high as $5 billion. That is, about ⅓ of the entire Q2 DeFi trading volume. Subsequent increases were also recorded throughout Q3, with a mean monthly increase of about 140%.
Notably, a major portion of this increase can be attributed to about four different DEXs. Uniswap alone accounted for about 50% of the total DEX trading volume. Uniswap was followed by SushiSwap, Balancer, and Compound. Interestingly, eight DEXs were able to attain a $1 billion trading volume benchmark as compared to the Q2 volume of zero. According to TokenInsight, this increase can be attributed to the “wealth effect” brought to life by decentralized exchanges (DEXs).
Decentralized Exchanges (DEXs) and Centralized Exchanges (CEXs)
DEXs brought about several amazing insights into the decentralized tech space. They provide the average user with unrestricted access to top-notch projects. This feature most likely led to the DeFi craze.
Also, previously, the relationship between tokens and exchanges was more beneficial to centralized exchanges. They could easily demand huge fees before listing a cryptocurrency.
DEXs, in simple terms, provided a sustainable market outside of centralized exchanges (CEXs). Subsequently, providing crypto tokens with the right environment to boom outside of CEXs.
Nonetheless, despite the huge DEX trading volume Q3 gains, the entire DEX sphere only made up about 1.24% of the total spot market trading.
Find out more about the DeFi boom on the Altcoin Buzz YouTube channel.