The trading volume on major cryptocurrency exchanges experienced a significant decline in April, coinciding with Bitcoin’s retreat from its all-time high. Spot trading volume on centralized exchanges like Coinbase Global, Binance, and Kraken dropped by 32.6% to $2 trillion last month, with derivatives trading volume also seeing a decrease of 26.1% to $4.57 trillion. This decline in volume was attributed to tightening financial conditions in the US as the Federal Reserve sought to address inflation challenges. The decrease in trading activity came after the Bitcoin halving event on April 19, which reduced the supply of new coins by half and injected uncertainty and fear into the market.
The decline in trading volumes also affected the market share of Binance, the world’s largest crypto exchange, which dropped by almost 4% to 33.8%, reaching its lowest level since January. The CME Group, a prominent derivatives marketplace, also experienced a decline in crypto trading volume for the first time in seven months. In April, its derivatives trading volume decreased by nearly 20% to $124 billion. Despite the decline in trading volumes, trading activity on centralized exchanges remains at an elevated level compared to previous months.
Centralized cryptocurrency exchanges like Binance saw a large surge in trading volumes between October 2023 and March 2024. According to Bybit’s 2024 Institutional Industry Report, exchanges like OKX, Binance, and Bybit experienced significant growth in trading volumes. OKX saw a 278% increase, Binance saw a 239% surge, and Bybit added 264% to its trading volumes during the same period, surpassing the industry’s average growth rate of 255%. US-based exchange Coinbase also witnessed growth with a 193% increase in trading volume. However, the growth of centralized exchanges did not surpass the even more rapid expansion of decentralized exchanges (DEXs), with leading DEX Uniswap v3 seeing a 320% increase in volumes during the same period, surpassing $2 trillion in lifetime trading volume.
The surge in trading volume earlier in the year following the introduction of US exchange-traded funds investing in Bitcoin waned due to the tightening of financial conditions in the US, as the Federal Reserve addressed inflation challenges. The release of higher-than-expected Consumer Price Index (CPI) inflation data and escalating geopolitical tensions in the Middle East injected uncertainty and fear into the market. This, coupled with negative net flows from spot Bitcoin ETFs, led major crypto assets to reach their range lows. Despite the decline in trading volumes, trading activity on centralized exchanges remains elevated compared to previous months.
The decline in trading volumes was also influenced by various factors such as the release of CPI inflation data, geopolitical tensions in the Middle East, and negative net flows from spot Bitcoin ETFs. These factors, in addition to the Bitcoin halving event and the tightening of financial conditions in the US, contributed to the decline in trading activity on centralized exchanges. Despite the decrease in volume, exchanges like Binance, Coinbase, and Bybit experienced significant growth in the months leading up to the decline. The growth of DEXs also outpaced that of centralized exchanges during the same period, emphasizing the increasing popularity and adoption of decentralized trading platforms in the cryptocurrency market.
