Peer-to-Peer Crypto Platforms under Pressure in Declining Market

Decentralized peer-to-peer crypto exchanges are under heavy pressure as they witness a sharp decline in the total market share. 

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

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

Earlier, several from the crypto industry had predicted a golden period for P2P platforms such as Uniswap and dYdX following the collapse of FTX exchange, which undermined trust in centralized platforms that take 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 on complex user interfaces, slower speeds and lower liquidity than their competitors like Binance Holdings Ltd. or Coinbase Global Inc.

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

Significant efforts to enhance peer-to-peer exchanges have surfaced recently. Uniswap, being the leading decentralized trading venue, recently introduced a protocol aimed at improving prices for clients by consolidating diverse sources of digital-asset liquidity. 

Meanwhile, blockchain firm Vertex made waves earlier this year with the launch of its decentralized exchange, boasting comparable transaction speeds to traditional centralized platforms.

Monthly Active Users Increase on Decentralized Exchanges 

According to data from Token Terminal, decentralized exchanges, though facing challenges in terms of trading volumes, have witnessed a consistent rise in monthly active users since 2020.

The numbers of monthly active users surpassed 1 million users for a significant portion of this year. 

This surge in adoption could be attributed to growing concerns surrounding the stability of centralized platforms, particularly in light of FTX collapse due to accusations of extensive fraud last year, which subsequently led to increased regulatory scrutiny in the industry.

Crypto exchanges giants Binance and Coinbase are also facing regulatory scrutiny from regulators around the world as they fight for their life in the USA. 

Last month, the institutional-only crypto exchange EDX Markets was launched, gaining support from prominent firms such as Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp.