Despite the fact that the community is anticipating a significant move toward decentralized exchanges, JPMorgan predicted that centralized exchanges will continue to dominate the bulk of the global trading volumes for digital assets (DEX).
The strategist at JPMorgan, Nikolaos Panigirtzoglou, and his colleagues believe that the slower transaction speeds, asset pooling, and order-traceability characteristics of DEX will limit institutional involvement.
The group of analysts working for JPMorgan cited the absence of a limit order or stop loss feature on DEXs, as well as their dependence on price oracles that pull data from centralized exchanges, as factors that would restrict the adoption of the technology.
These platforms’ susceptibility to hacks and exploits, the requirement for over-collateralization, and the systemic risks posed by the cascade of automated liquidations will all act as barriers to their expansion into a wider environment. In addition, the need for over-collateralization will make it difficult for these platforms to attract new users.
According to statistics provided by DefiLlama, after the fall of FTX, this month’s trading volume on decentralized platforms climbed by 68% from the previous month to a total of $97.22 billion, which represents the largest level since May.
Many people see this as the beginning of an ongoing push toward transparency and a sign of the diminishing dependability of centralized platforms. [Citation needed] Although JPMorgan is aware of the recent surge in DEX trading volume, the company does not think it to be the start of a substantial long-term trend.
JPMorgan anticipates that there will be multiple additional regulatory attempts in the near future, including those that have an emphasis on custody, client asset protection, and transparency. This is in response to the collapse of FTX, which spurred the need for crypto regulation.
Compiled by Coinbold