The recent surge in cryptocurrency markets over the last month seems to have spilled over into the realm of decentralized finance (DeFi).

The trading volume on decentralized exchanges (DEX) has traditionally been considerably lower than that of centralized exchanges (CEX). However, the recent market rally has led to increased activity, albeit at a somewhat slower pace.

DEX Trading Volume Picks Up Pace

According to research from Kaiko, major platforms such as Uniswap and Curve on the Ethereum blockchain, as well as Pancakeswap on the Binance Smart Chain, have noted a surge in activity.

In November, the monthly trade volume on DEXs rebounded to $29 billion, recovering from a multi-year low experienced in September. Despite this improvement, it still falls significantly short of the all-time high of over $124 billion recorded in May 2021. The market share of DEX trade volume compared to CEX has also declined over the past year, dropping to just 3% in November, down from 5% in January.

Notably, in November 2020, during the peak of DeFi excitement, DEXs achieved an all-time high market share of 10%. This indicates that DEXs were more affected by the low market participation observed since the collapse of FTX.

While the largest DEX, Uniswap, has seen a reduction in its market share relative to Coinbase, it still holds a significant position at 40%.

The upswing in DEX activity is also evident in elevated lending rates. Increased lending rates, particularly for stablecoins, indicate a rise in the number of loans taken out, often for trading purposes.

DEX Trading Volume Till Q3

The signs of recovery observed in the later part of Q1 lost momentum as trading volumes did not sustain the upward trend in Q2. The pressure from regulators particularly impacted centralized cryptocurrency exchanges, making them the primary losers.

However, the resulting turbulent market conditions also affected decentralized exchanges. In Q2, the spot trading volume on the top 10 decentralized exchanges (DEX) amounted to $155 billion, marking a decrease of over 30% from Q1.

The total spot trading volume on the leading 10 decentralized exchanges reached $105 billion in Q3 of 2023, marking a decline of -31.2% compared to the previous quarter.

During the third quarter, CoinGecko said THORchain experienced the most significant growth, with its volume increasing by 113%, equivalent to $1.27 billion. This surge in volume, however, may be partly attributed to illicit transfers occurring on the network involving notable users such as the FTX hacker and the North Korean Lazarus group.

Contrastingly, Sushi, a longstanding presence on DEXs since its establishment in 2020, fell out of the top 10 during the period and was replaced by Orca.