In brief

  • Binance did the most volume of any centralized exchange in September, according to the CryptoCompare Exchange Review for this month.
  • Centralized exchanges saw spot and derivative market volume drop in September compared to August.
  • Centralized exchanges see skirting regulations as a key draw for decentralized exchange users, but aren’t yet concerned about being overtaken.

Centralized exchanges are starting to feel the pressure as decentralized exchange trading volumes grow, but many still believe they have competitive edges that will keep users coming back.

The September 2020 CryptoCompare Exchange Review found trading volume on centralized exchanges declined in September compared to the previous month despite hitting a yearly high for single-day volume of more than $27.6 billion on September 3. Spot and overall derivatives market volumes declined—both by 17.5%.

In terms of derivatives, Huobi’s volume dropped by more than one-fourth from August, OKEx was down 18.5%, and BitMEX volumes dove over 30%. Binance volumes also dropped, though only by 10.7%, making it the derivatives leader in a weakened market. 

One bright spot in terms of derivatives: Bitcoin options trading on CME increased by 79% compared to August levels. Options contracts are one type of derivative that gives traders the option to buy an asset at a predetermined price on a future date. Unfortunately for CME, options contracts still represent just a tiny fraction of its overall volume, accounting for 4,872 contracts in September compared to 201,893 Bitcoin futures contracts.

For spot trading, Binance took the top spot for monthly trading volume with more than $113.3 billion transacted throughout the month. Huobi came in second with $60.75 billion in volume, while OKEx processed trades worth more than $55.4 billion. 

Aggregate volume for both derivative trading and market rate trading fell 17.5% compared to the previous month.

Still, despite the underwhelming numbers, responses from the 26 centralized exchanges included in the monthly report show that centralized exchanges still believe they play an integral role in the cryptocurrency ecosystem.

While decentralized exchanges have grown at a breakneck pace in terms of volume over the last few months, their centralized counterparts see the activity as little more than the most recent tactic to avoid regulatory control—46% said they thought anonymity and the lack of Know Your Customer (KYC) verification was the leading factor in attracting users to decentralized exchanges. 

Moreover, two thirds of centralized exchange respondents said their deep liquidity and ease of working with fiat currencies gave them an edge over DEX. So confident were most exchanges in their leading position and development plans, more than 70% said it was unlikely DEX liquidity would overtake what was available on centralized exchanges within the next two years.

An overwhelming majority of centralized exchanges surveyed, more than 90%, said they thought it likely institutional investment in the crypto space would increase within the next two years, which would benefit centralized exchanges due to regulatory requirements.

Centralized exchanges may be feeling good about the future, but they’ll need to be sure to stay on the right side of the law, lest they suffer the same fate as recently indicted BitMEX executives.