Centralized cryptocurrency exchanges are starting to feel the pressure as the volumes of decentralized exchanges grow, but many still believe that centralized exchanges have competitive advantages that will keep users coming back to them.

I found a review made by a platform “CryptoCompare” For the month of September 2020, trading volume on central trading platforms decreased in September compared to the previous month (August), despite recording a record annual trading volume in a single day, with one-day trading volume reaching more than $27.6 billion on September 3.

Trading volume in the spot market and total derivatives decreased by 17.5%.

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In terms of derivatives, trading volume on Huobi is down more than 25% from August, OKEx is down 18.5%, and BitMEX is down 30%.

Trading volumes on Binance are also down, although they are only down 10.7%, which makes them a leader in derivatives trading in a relatively weak market.

Amid this downturn in trading volumes, the volume of bitcoin options trading on the Chicago Mercantile Exchange is up 79% compared to August levels.

Note that options contracts are a type of derivative that gives traders the option to buy an asset at a predetermined price on a future date.

Unfortunately for the CME, options still account for a small portion of its total volume, representing 4,872 contracts in September compared to 201,893 Bitcoin futures contracts.

For spot trading, Binance ranked first in terms of monthly trading volume with over $113,3 billion traded over the course of the month.

Huobi came in second with a trading volume of $60.75 billion, while OKEx processed more than $55.4 billion.

Despite the disappointing numbers cited above, responses in the report show that 26 central exchanges still believe they play an essential role in the cryptocurrency ecosystem.

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Whereas, decentralized trading platforms have grown at a rapid pace in terms of volume over the past few months.

46% of centralized exchanges believe that the advantage of decentralized exchanges that makes their trading volumes rise is due to the anonymity and lack of KYC verification procedures, unlike that of centralized exchanges.

Two-thirds of respondents from centralized platforms also tell them that the greater liquidity and ease of handling fiat currencies is what distinguishes them from decentralized platforms.

Most centralized exchanges are also very confident in their leadership position and development plans, with more than 70% saying that it is unlikely that the liquidity of decentralized exchanges will exceed that of central exchanges at least in the next two years.

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According to the same report, the vast majority of central trading platforms surveyed believe that institutional investment in crypto is likely to increase over the next two years, which will benefit central exchanges due to regulatory requirements.

Centralized exchanges may feel good about the future, but they will need to make sure they stay on the right side of the law, lest they suffer the same fate that Bitmex executives recently faced.

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