Apr 3, 2024 - Economy

Decentralized crypto exchanges see record volume in March

Illustration of a pattern of connected gold ribbons with a crypto symbol

Illustration: Sarah Grillo/Axios

Another all-time high has just been set in cryptocurrency markets: March was the biggest month on decentralized exchanges (DEXs), according to data provider DefiLlama.

Why it matters: The surge of activity signals the energy is out there again, with investors looking for short-term gains in a market that's generally going up.

By the numbers: DefiLlama logged $268 billion in DEX volume in March.

  • $30 billion more changed hands last month than in November 2021, the prior monthly high.

DEXs are run by smart contracts on public blockchains. No humans are needed to operate them on a day-to-day basis.

  • Investors deposit pairs of tokens into pools on the DEX, and the ratio of tokens in the pool reflects the price for each token.
  • They're permissionless marketplaces — down to what gets listed on them. Anyone can fire up a market for any token on a DEX's blockchain, so they are the first place that new tokens get liquidity.
  • People (or bots) trying to find the next dogwifhat or pepecoin watch DEXs like hawks.

Between the lines: Uniswap and PancakeSwap are the leading DEXs gaining volume now, while the smaller DEXs are dropping, which could mean that some of the sugar rush of the meme coin frenzy is shaking off.

  • The four most traded tokens on Uniswap now are ether (ETH), wrapped bitcoin (WBTC) and the top two stablecoins, usd coin (USDC) and tether (USDT).

Zoom in: Solana is driving a significant portion of the action, though Ethereum DEXs (in particular, Uniswap) still lead.

  • Four of the top 10 DEXs are on Solana. If they were all one DEX, they would be the third largest, after Ethereum's Uniswap and Binance Smart Chain's PancakeSwap.
  • Trading on Solana has reached levels that make all prior eras of trading on the blockchain look tiny.

How they work: When traders use decentralized exchanges, they mostly trade with the exchange itself.

  • The investors who deposit token pairs into the DEX pools earn trading fees from people using the pools to trade with.
  • If a DEX's prices get knocked out of line with other parts of the larger market, arbitrage bots tend to knock them back in line swiftly.

Zoom out: The only identity a person needs to trade on a DEX is a cryptocurrency wallet, which leaves lawmakers and regulators uneasy about them.

The bottom line: Everyone is a genius trader in a bull market.

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