In early 2023, a surprising trend has emerged in the cryptocurrency trading landscape: Coinbase, a leading centralized exchange (CEX), has significantly outpaced Uniswap, one of the most prominent decentralized exchanges (DEX), in trading volume. According to data from crypto analytics firm Kaiko, Coinbase’s trading volume reached approximately $93 billion by late February—nearly double Uniswap’s $57 billion.
This shift contradicts widespread market expectations that followed the collapse of FTX and other major centralized platforms in late 2022. At the time, many analysts and crypto enthusiasts predicted a mass migration toward decentralized alternatives, driven by growing distrust in custodial services and heightened interest in self-custody and DeFi (decentralized finance). However, real-world adoption patterns suggest that user behavior is more complex than anticipated.
Why Centralized Exchanges Still Dominate
Despite the ideological appeal of decentralization, centralized exchanges continue to play a pivotal role in onboarding new users and facilitating high-volume trading. Conor Ryder, research analyst at Kaiko, noted that predictions of a rapid shift to DEXs now appear “a bit premature.”
“Presumably the average investor is still put off by the worse user experience on some of these DEXs, compared to the more straightforward experience on CEXs,” Ryder said in a direct message. “I think CEXs will always be an essential part of the exchange landscape, whether we like it or not.”
The usability gap between centralized and decentralized platforms remains significant. Onboarding through Coinbase resembles traditional financial or tech platforms—users sign up with email, complete KYC verification, deposit funds via bank transfer or card, and begin trading within minutes. In contrast, using Uniswap requires setting up a non-custodial wallet (like MetaMask), managing private keys, understanding gas fees, and navigating smart contract interactions—all of which can be intimidating for newcomers.
👉 Discover how easy it is to start trading on a secure, user-friendly platform.
The FTX Collapse: A Short-Lived Boost for DeFi?
In the immediate aftermath of FTX’s downfall, there was a noticeable spike in activity across DeFi protocols. November 2022 saw decentralized exchange trading volumes surge to $113 billion—the highest monthly total since May—according to analytics platform DefiLlama. New Ethereum address creation also peaked at around 228,000 per day on November 24, signaling increased on-chain engagement.
However, this momentum has since cooled. Daily new Ethereum addresses have dropped below 90,000, and DEX volumes show no sign of reaching $100 billion again in early 2023. Lucas Outumuro, head of research at blockchain analytics firm IntoTheBlock, observed that the initial enthusiasm for noncustodial trading has “waned out.”
“Getting onboard into Coinbase is much more similar to what people are used to with other tech or finance platforms, whereas getting into Uniswap is a completely different flow,” Outumuro explained via Telegram. “This makes adoption take a little longer as new users may feel intimidated.”
Structural Challenges Facing Decentralized Exchanges
Beyond user experience, several structural limitations hinder broader institutional and retail adoption of DEXs:
- Lack of advanced order types: Most DEXs do not support limit orders or stop-loss mechanisms, limiting risk management tools for traders.
- Reliance on centralized data: Many DEXs depend on price oracles that pull pricing data from centralized exchanges, undermining full decentralization.
- Slower transaction speeds: On-chain settlement introduces latency compared to off-chain order books used by CEXs.
- Security vulnerabilities: While eliminating counterparty risk, DEXs are still exposed to smart contract exploits and flash loan attacks.
- Over-collateralization requirements: Lending protocols within DeFi often require users to lock up more value than they borrow, reducing capital efficiency.
- Systemic liquidation risks: Automated liquidations during volatile markets can trigger cascading sell-offs.
JPMorgan strategists highlighted these issues in a November 2022 report, concluding that while DEX usage increased temporarily post-FTX, the rise likely reflected broader market deleveraging rather than a structural shift.
"While there has been some increase in the share of DEX in overall crypto trading activity in recent weeks, this is more likely to reflect the collapse in crypto prices and the deleveraging/automatic liquidations that followed the FTX collapse."
Key Keywords Driving Market Discourse
The ongoing debate around exchange models centers on several core concepts:
- Centralized Exchange (CEX)
- Decentralized Exchange (DEX)
- DeFi (Decentralized Finance)
- User Experience (UX)
- Trading Volume
- Self-Custody
- Onboarding
- Non-Custodial Trading
These terms not only define current market dynamics but also shape future innovation paths. For instance, improving UX without sacrificing decentralization could unlock mass adoption—a challenge many next-generation protocols are actively pursuing.
👉 Explore advanced trading tools designed for both beginners and pros.
Frequently Asked Questions (FAQ)
Q: Why did people expect DEX usage to grow after FTX collapsed?
A: The FTX collapse eroded trust in centralized custodians. Many believed users would move toward non-custodial platforms like Uniswap to maintain control over their assets, fueling expectations of a DeFi surge.
Q: Are DEXs safer than centralized exchanges?
A: DEXs eliminate counterparty risk since users retain custody of funds. However, they introduce other risks such as smart contract vulnerabilities, impermanent loss, and front-running attacks.
Q: Can you trade futures or use leverage on most DEXs?
A: While some emerging DeFi platforms offer derivatives trading, most DEXs lack robust margin or futures trading capabilities compared to CEXs like Coinbase or OKX.
Q: What caused the drop in new Ethereum addresses?
A: The decline reflects cooling speculative activity post-FTX crisis. Fewer new users are entering DeFi, and existing participants are less active due to bearish market conditions.
Q: Will CEXs always dominate trading volume?
A: For now, yes—especially for retail onboarding and high-frequency trading. But hybrid models and improved DEX interfaces could shift the balance in the long term.
Q: How do gas fees affect DEX usability?
A: High Ethereum network congestion leads to expensive transaction fees, making small trades uneconomical. Layer-2 solutions aim to solve this but aren’t yet universally adopted.
👉 See how low fees and fast execution can enhance your trading strategy.
Final Outlook: Coexistence Over Replacement
Rather than replacing centralized exchanges, decentralized platforms may evolve to complement them. Institutional investors still favor CEXs for compliance, speed, and advanced trading features. Meanwhile, DEXs serve niche markets focused on privacy, yield farming, and permissionless innovation.
The data suggests that while ideals of decentralization remain strong, practical considerations—especially ease of use—continue to drive mainstream behavior. As blockchain technology matures, the goal should not be to eliminate CEXs but to bridge the gap between accessibility and autonomy.
In this evolving ecosystem, both models have roles to play. The future of crypto trading lies not in choosing between centralization and decentralization—but in integrating the strengths of both.