Chainalysis report: The number of active exchanges continues to decline, and large DEXs are booming

This article is from Decrypt, original author: Stacy Elliott

Odaily Planet Daily Translator | Nian Yin Si Tang

- The value of large decentralized exchanges such as Uniswap and SushiSwap has increased 5x compared to last year.

- But according to a new report from Chainalysis, the overall number of active cryptocurrency exchanges has been steadily declining as smaller projects shut down.

Decentralized exchanges (DEXs) are booming and are now growing faster than centralized exchanges (CEXs), according to a new report from Chainalysis.

The value of large DEXs, which include Curve, Uniswap, and PancakeSwap, grew by about 550% between August 2020 and 2021. The number of DEXs has grown more than any other category, far outpacing OTC brokers, centralized exchanges, and what Chainalysis calls “high-risk exchanges,” or those that require little to no KYC.

In fact, according to Chainalysis, while the total number of active cryptocurrency exchanges has been steadily declining, the number of large decentralized exchanges has been rising. In July last year, after steady growth since January 2019, the number of all active crypto exchanges began to flatten out. In the following 12 months, the number fell from 845 to 672. Kim Gauer, head of the Chainalysis research team, said that this situation is not surprising, but there are some questions that are worth thinking about.

She told Decrypt that when they were doing their data analysis, they knew there was consolidation among crypto exchanges, but didn’t know how unevenly this was affecting different types of exchanges.

Gauer said the main reason for the drop in exchanges appears to be the closure of smaller exchanges. It’s unclear from the data Chainalysis analyzed whether mergers and acquisitions prompted the closures. But she said she suspects many exchanges closed because they couldn’t get enough liquidity.

A few years ago, the number of active exchanges used to vary with the market, but this is no longer the case when a few large exchanges in each category dominate and grow much faster than smaller exchanges.

As Chainalysis noted in its report, the growth of DEXs “has coincided with the explosive growth of the DeFi category.” According to DeFi Llama, there is currently more than $274 billion in capital flowing through DeFi applications, most of which is locked in Ethereum-based DEXs such as Curve and Uniswap.

The growth of derivatives exchanges is also noteworthy. The number of derivatives exchanges is still small compared to other categories.

Derivatives exchanges conducted 265,000 trades in August. This pales in comparison to the 5 million trades DEXes saw in the same month. But the average size of a derivatives trade was $79,000, while it was $26,500 for DEXes.

Due to their larger average transaction size, derivatives exchanges have seen their value growth even greater than that of DEXs last year. According to the report, trading volumes on major derivatives exchanges such as Derebit, Bitmex, and FTX surged 686%.

“We are seeing a lot of investment going into these platforms, even though not many are currently listed as derivatives [exchanges] in our data,” Gauer added. “But they are large and liquid.”