Spot-market trading volume at Binance sagged 23% in September – to $344 billion – its lowest monthly mark since November 2023, CCData reported last week.
And Binance, the world’s largest cryptocurrency exchange, wasn't alone.
Other mainstream exchanges, including OKX, HTX, Coinbase, Kraken, and Bybit reported month-on-month declines of 25%, 24%, 30%, 25% and 20%, respectively, Jacob Joseph, senior research analyst at CCData, told Cointelegraph on Oct. 8.
According to Alex Tseng, head of sales trading at OSL, a centralized trading platform (CEX): “Trading volumes overall in the entire digital asset space were relatively muted in the past quarter.”
What makes this somewhat confounding is that this dip has come at a time when Bitcoin prices were rising or holding steady.
Explanations for the decline provided by knowledgeable market observers run the gamut from a ramping up of world geopolitical tensions and U.S. elections to continued tight money as well as a wait-and-see attitude on the part of investors in anticipation of better times.
Seasonality could also be a factor. The old adage “sell in May and go away” could apply here, Tseng suggested. Stock prices historically fall between May and October, and crypto exchanges may be doing the same.
Bitcoin shines in September
That said, it’s strange that trading volumes were so tepid at a time when Bitcoin, the crypto market leader, seemed to be so popular.
"BTC recorded its best September on record this year, returning just over 8.4%,” noted Kaiko’s quarterly market report (October 2024). “Price action was largely driven by improved sentiment as markets reacted positively to monetary policy shifts around the globe.”
Bitcoin yearly price chart. Source: CoinMarketCap
Blurring matters further, not all centralized cryptocurrency exchanges were dropping.
Crypto.com’s market share soared over the third quarter, reaching more than 50% among competing USD-compatible exchanges, and eclipsing Coinbase in the process, according to Kaiko.
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CCData’s September report also flagged Crypto.com’s recent trading surge, noting that its spot and derivatives volumes rose 40.2% and 42.8% to $134 billion and $149 billion, respectively, in September. “Now making it the fourth largest centralized exchange [globally] by volumes,” CCData stated.
Crypto.com may be an outlier
Still, Crypto.com may have been the exception, and it’s not clear if it can maintain its momentum. While September volumes at many large exchanges were down, they picked up after the the U.S. Fed cut interest rates on Sept. 18.
Moreover, “Binance remains the largest CEX by a wide margin,” Justin d'Anethan, head of business development (APAC), at Keyrock, a cryptocurrency market maker, told Cointelegraph.
Change in market share among CEXs. Source: CCData
The slump at large CEXs like Binance could be due to several factors including a more challenging market environment, institutional repositioning of assets on other venues, as well as “liquidations tied to ongoing bankruptcy proceedings averaged across multiple brokers and exchanges,” d’Anethan continued, adding:
“These kinds of shifts can scatter volumes across smaller exchanges, which might explain why CryptoCom saw a bump.”
According to Joseph: “Crypto.com’s recent rise seems to be an outlier, likely due to the onboarding of new institutional clients and advanced retail participants.[...] However, it remains to be seen if they can sustain this upward trend in volumes moving forward.”
The upcoming US elections and global political and economic worries may be altering trading patterns too. “The influence of macro and political uncertainty has been particularly evident in markets like Japan, where Bank of Japan policy normalization has been a significant source of recent volatility,” Dessislava Ianeva, senior research analyst at Kaiko, told Cointelegraph, adding:
“With the country preparing for general elections in October, we saw that while Bitcoin prices increased, trading volumes on Japanese platforms remained subdued.”
Boost for altcoins
Others observed some recent weakening of Bitcoin’s preeminence in the cryptocurrency realm. “The more interesting story is that Bitcoin dominance started to decline and altcoins volumes went up after FOMC [the US Federal Open Market Committee’s interest rate cut of 50 basis points on Sept. 18] but if this can last… that’s the real question,” Markus Thielen, founder at 10x Research, told Cointelegraph.
Joseph agreed that the rate cut also boosted altcoins, at least in the short term, as investors were now more keen to bet on some of the less well-established cryptocurrencies, commenting:
“Bitcoin's trading dominance on centralized exchanges has decreased since the FOMC's rate cut, with the 7-day average market share dropping from 26% to 24%. This indicates that market participants are becoming more willing to take risks in pursuit of higher returns with altcoins.”
“We observed an increase in altcoin dominance at the end of September, reaching its highest level since March but it has retreated since,” added Ianeva.
In any event, many agreed that the US interest rate cut provided a shot in the arm to crypto traders. “Trading activity on centralized exchanges has notably increased since the Federal Reserve decided to cut interest rates, with the seven-day average spot trading volume rising by 24% to $47.8 billion following this decision,” said Joseph.
Not all were so bullish on the altcoin front, however. “Despite the US Fed's rate cut in the last FOMC, the current monetary conditions remain tight and not conducive to altcoin speculation,” OSL’s Tseng told Cointelegraph.
D’Anethan weighed in on altcoins as well. “With the rate cut, we have seen altcoins relatively outperforming, no doubt as traders go further out the risk curve but also, in the same vein, because some think the Bitcoin trade has kind of played out and so would rather put chips on coins with more room to grow. Whether this is a lasting shift or just another phase remains to be seen.”
Rising activity seen on decentralized exchanges
Looking beyond September, d’Anethan also sees “a steady rise of DEXs [decentralized exchanges] compared with CEXs.”
Some professional traders continue to like DEXs because of their pseudo-anonymity, security, and competitive liquidity on certain pairs. “This isn’t just about volumes — it’s about a growing preference for decentralized setups, especially after the string of CEX failures last year,” d’Anethan explained.
The market share of decentralized exchanges in the spot trading arena rose to 10.9% in October, CCData’s Joseph told Cointegraph, although that share is still below the yearly highs seen in July.
“DEXs have benefited from offering access to assets not available on centralized exchanges and continue to gain popularity amongst more sophisticated crypto traders,” he said.
In the long run, CEXs and DEXs will continue to coexist, said OSL’s Tseng. Centralized exchanges provide the easiest gateway for new crypto entrants to gain crypto exposure, whereas decentralized exchanges are “more catered towards crypto natives who value self custody and removal of counterparty risk.”
Are investors waiting for a year-end rally?
Finally, while a confusing political and economic world picture may have jumbled traditional crypto trading patterns, there is a simpler explanation for the recent drop in exchange trading volume: Traders are simply keeping their powder dry in anticipation of better times.
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“There's also the possibility that contenders [i.e., CEX’s] are ramping up marketing efforts ahead of a year-end rally, hoping to capture more user flow during bullish periods,” said d’Anethan.
Or as Kaiko noted in its October report, crypto trade volumes may not have increased at the same rate as prices in September because “some participants are still in a wait-and-see mode.”
Joseph expected trading on centralized exchanges to rise in the fourth quarter of 2024, driven by several catalysts, including the Fed’s rate cut and the U.S. elections. Historically, “Q4 has shown the highest quarterly trading volumes in six of the last ten years.”