Author: Robert Stevens
Translator: Yu Shunsui
The trading volume of Ethereum-based decentralized exchanges (DEX) has experienced a “climactic” decline in the past month. According to Dune Analytics, the transaction volume in the past 30 days has fallen by 41%.
DEX weekly trading volume peaked on August 31, just over US$8 billion; it subsequently reached a monthly high of US$6 billion on September 14. But as of October 12, the weekly trading volume has fallen to just under $3 billion, a drop of more than 62% from its peak in late summer.
DEX is a non-custodial cryptocurrency exchange. These agreements do not escrow the user’s cryptocurrency. On some platforms, such as the market leader Uniswap, any token can be listed; it is decentralized, so regulators cannot shut it down.
In this year’s decentralized finance (DeFi) craze, DEX has become very popular; starting from about the end of June, people have invested billions of dollars in DeFi loan agreements and exchanges to take advantage of the high incentives they provide to users, sometimes The rate of return is as high as 1000%.
But the prosperity will not last. Everyone knows: In order to maintain the magic, many agreements provide more and more incentives to attract people to use their platforms; data shows that once the incentives of the agreement are over, many people will stop insisting.
Despite the increasing dominance of the decentralized exchange Uniswap in the market, Uniswap’s trading volume has also declined. On September 1, Uniswap’s daily trading volume reached its peak, just below US$1 billion; yesterday’s trading volume was US$234 million.
Johnson Xu, research director of Huobi DeFi Labs, said, “I think the DEX transaction volume is highly correlated with the DeFi market in general.”
When talking about the decline in trading volume, Johnson said that various factors are at work, but “one of the main reasons is that people’s current rate of return is not so high, just because these crazy’yields’ are unsustainable, and Often accompanied by huge risks.”
He said, “The market is now returning to a more reasonable level, which has reduced the volume of DEX transactions. When the market cools down a bit, these yields will be adjusted accordingly to reflect market consolidation in a healthy way.”
However, while the DEX trading activity has decreased, the amount of pledged funds in the DeFi smart contract has not decreased.
Uniswap’s liquidity (funds that users pledge on the platform to facilitate token swaps and earn fees) has increased from approximately US$1 billion in mid-September to approximately US$3 billion today.
According to data from DeFi Pulse, part of this can be attributed to the recent increase in crypto prices, but the amount of ETH, BTC and DAI locked on exchanges has increased; at the end of August, when the DEX transaction volume reached its highest point, there were 800,000 ETH (Valued at about 381 million U.S. dollars at the time) locked in the exchange, there are now approximately 3.2 million ETH (worth 1.3 billion U.S. dollars).
In addition, the amount of funds invested in DeFi smart contracts is also rising; according to DeFi Pulse data, the total DeFi lock-up (TVL) is approximately $12.3 billion, a record high.
However, part of this is also due to recent price increases. The price of Ethereum was around US$360 for almost the entire month and most of this month, and it broke through US$400 yesterday for the first time since the beginning of September. However, the total amount of ETH locked in DeFi dropped from approximately US$9 billion on October 20 to US$8.9 billion today.
Johnson said, “Compared with traditional markets, DeFi participants can still get reasonable (higher) returns. Many Yield Farming projects currently have an annualized return (APY) of around 15%-30%. Some market participants still invest funds in these relatively low-risk activities in order to earn reasonable risk-adjusted returns.”
