In brief

  • Decentralized exchanges are seeing record smashing volume at the same time Robinhood and other brokers are restricting trading for retail investors.
  • January saw DEX volume of $63 billion in January, more than half of all volume seen in 2020.
  • As new investors the market, DeFi offers a ready alternative for those disillusioned with traditional institutions.

The frenzy around GamesStop, AMC, and other “meme stocks” have caused stock brokers like Robinhood to restrict or suspend trading for thousands of users. But decentralized exchanges like Uniswap are seeing a frenzy of their own, with no way for the developers—or anyone else—to interfere.

Decentralized exchanges (DEX) just closed out their biggest month ever, processing more than $63 billion in trading volume over the last 30 days, according to data from Dune Analytics. That’s more than half the total volume from all of 2020 in January alone.

It’s a sign of the continued rapid growth of the cryptocurrency industry, and specifically decentralized finance (DeFi), as cracks begin to show in the structure of traditional stock trading.

Decentralized exchanges are built to run on blockchains like Ethereum, using smart contracts to automatically swap between cryptocurrencies. The decentralized nature of the exchanges means that no centralized authority connects trade orders to one another, instead using pools of liquidity contributed by protocol users to swap directly between digital assets. 

No centralized authority also means DEX trades can never be censored or suspended, unlike brokers such as Robinhood that can change the rules about who can trade, and how much, seemingly at will.

Decentralized exchanges are part of a larger industry known as DeFi, or decentralized finance. DeFi aims to replace the products and services provided by the traditional financial industry, such as loans, asset swaps, and interest bearing deposits on decentralized blockchain networks, allowing equal access for anyone with an internet connection.

DeFi has grown rapidly since the summer of 2020, increasing the total value locked in protocols (TVL), similar in some ways to measures of assets under management (AUM) in traditional financial circles, by nearly 1,400% to more than $26 billion.

Uniswap, by far the most popular decentralized exchange, captured more than 40% of all DEX trading volume in January. The UNI token, used for voting on decisions about the future development of the protocol, has also increased in price more than 300% since the start of 2021.

Robinhood has served as an introduction to markets and trading for thousands of Redditors and other newbie investors searching for both profit and excitement, as COVID-related shutdowns drag on. 

But with billionaire hedge funds seemingly leveraging their size and clout to change the rules of the game daily, decentralized exchanges offer a ready alternative that isn’t owned and controlled by those at the top. If January volume is any measure, there’s a vibrant market ready and waiting should those day-trading rebels ever catch on.