Yesterday, the team behind Web3 analytics firm Brave New Coin posted the results of the company's study of crypto market share changes following the collapse of FTX, the largest crypto exchange platform, at the end of 2022. For its research, Brave New Coin used data from FTX itself before its closure, as well as information from other major crypto exchanges such as Kraken, Binance, Coinbase, Gemini, and Bitstamp.
Research conducted by Brave New Coin found that FTX's collapse dramatically affected trading volumes on other leading CeFi platforms such as Binance, Coinbase, and Kraken, especially during the first three months after the crypto exchange giant's fall. Although FTX used to be a major ETH trading ecosystem which means the company's bankruptcy created a potential for other leading exchanges to attract its users, this did not happen quickly as trust in centralized exchanges was lost.
The study noted that lower crypto user activity of crypto users considerably reduced balances of exchange platforms.
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"One of the clear winners of the FTX collapse is the decentralized exchange space," the Brave New Coin team claimed in the report, adding that there was "an immediate spike in volumes after the fall of FTX, however, following this volumes dropped off before starting to rise again from the beginning of 2023. Since then, DEX volumes have continued to remain higher than pre-FTX collapse levels."
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Brave New Coin analysts claim that complete control over assets, enhanced privacy, and security have made decentralized exchanges (DEXs) an attractive alternative to centralized platforms. However, it must be clarified that speaking about security, Brave New Coin refers to security as DEX's "inherent lack of counterparty risk."
This point should probably be linked to the asset control mentioned above, as security is a known vulnerability of DeFi projects including DEXs. Unfortunately, recent studies by cybersecurity firms, including Beosin's Q1 2023 Global Web3 Security Report, have shown that DeFi protocols have been a prime target for hacking attacks.
As Akash Takyar, CEO of Web3 and AI solutions development company LeewayHertz, said in his blog post, "Both Centralized and Decentralized Finance aims to achieve the same goal. They plan to make crypto trading popular and improve the trading volume. However, the way these two ecosystems carry out their objectives is different." According to Takyar, CeFi focuses on the security of funds and fair trading, while DeFi "wants to make the space intrusion-free," and "provides a space for investors to implement their strategies without having to deal with an intermediary body."
"While the dust is still settling after the FTX collapse, it is evident that the crypto community has adapted by diversifying its trading options and placing greater emphasis on decentralized platforms. This has helped to create a more resilient ecosystem that is better equipped to withstand potential future disruption," Brave New Coin summarizes its findings.
