3 - 6 minute read
Centralized crypto exchanges have seen a dip in trading volumes in April for the first time in three months as digital assets cool off from a hot first quarter. According to blockchain data provider Kaiko, trading volumes on centralized exchanges have fallen back following three consecutive months of gains. April’s volumes were almost half of those in March at roughly $500 billion, according to the data. The month has been the lowest so far this year in terms of volumes with March being the highest.
The decrease in trading volumes in April was significant, with legitimate centralized exchange spot volume decreasing by 43.8% to $400.5 billion, according to data from The Block. Binance remains the market leader with a dominance of 71.6%, according to the data. Furthermore, Binance has a 24-hour trading volume of around $10 billion, which is significantly larger than its nearest rival Coinbase with $1.1 billion, according to CoinGecko. In late April, Binance’s Bitcoin balance increased by over 50,000 BTC, roughly $1.5 billion, in a month. The move preceded the sell-off as BTC hit heavy resistance just over the $30,000 level.
U.S.-based crypto exchange Coinbase has seen its app downloads also in decline in recent months as trading volumes dwindle in the sideways market, according to a report from Yahoo News. Tom Grant, the VP of research at Apptopia, a research firm that tracks app usage metrics, said the shrinking app usage paints a bearish picture for the company.
The CEX volume decline comes as digital asset markets began to retreat from their 2023 highs in mid-April. On April 16, total market capitalization hit an eleven-month high of $1.34 trillion. However, markets have declined 7.5% to $1.24 trillion since then. Since the beginning of the year, crypto markets have gained 50% but have remained largely range-bound for the past six weeks or so.
Trade volumes on #CEXs declined in April after rising for three consecutive months and surpassing pre-FTX levels in March.
— Kaiko (@KaikoData) May 3, 2023
Overall, however, the crypto market remains significantly larger than it was before the 2020 bull run.#crypto #TradeVolume #liquidity #CEX pic.twitter.com/cmftFD3Qya
Analysts have hinted that the correction is likely to continue as markets have been somewhat overheated for the first quarter of the year. However, Kaiko noted that volumes had reached pre-FTX collapse levels until April’s decline. It also noted that markets remain above 2020 levels in terms of trade volumes. “Overall, however, the crypto market remains significantly larger than it was before the 2020 bull run,” said Kaiko.
The decrease in trading volumes on centralized exchanges has implications for traders who rely on these exchanges for liquidity. The decrease in trading volumes could indicate a shift in investor sentiment towards digital assets, suggesting that investors may be looking to take profits and move into other markets. The decrease in trading volumes could also suggest that investors are becoming more cautious in their approach to digital assets and are looking for more stable assets.
The Bottom Line
The decrease in trading volumes on centralized crypto exchanges has implications for traders who rely on these exchanges for liquidity. The decrease in trading volumes could indicate a shift in investor sentiment towards digital assets, suggesting that investors may be looking to take profits and move into other markets. Traders should be cautious when trading in digital assets, particularly during times of high volatility. It is important to have a solid understanding of the current market conditions and to be aware of any potential risks.
