JPMorgan says centralized exchanges will continue to dominate cryptocurrencies


The collapse of FTX shocked the crypto world. However, many voices within the industry saw the collapse of a centralized crypto exchange as a new opportunity for DeFi (Decentralized Finance).

As trust in centralized exchanges fades, DeFi protocols will become the platforms of choice for trading digital assets. These platforms are unreliable, transparent, transparent, and overpriced. This means that they are potentially more powerful than centralized exchanges such as FTX.

However, analysts noted that DeFi still suffers from some significant limitations. Earlier, JPMorgan released a report recognition That the recent string of cryptocurrency bankruptcies has come from centralized entities.

However, Nikolaos Panegirzoglu, an analyst from the investment bank, says centralized exchanges are likely remain dominant in the foreseeable future.

"We are skeptical of a structural shift away from centralized exchanges (CEX) into decentralized exchanges (DEX)," Panigirtzoglou said.

Most price discovery still happens on centralized exchanges, and DeFi protocols rely on oracles that get price data from them. Moreover, DeFi is still vulnerable to hacks and exploits. Chainalysis estimates combined losses of $3 billion across DeFi in 2022.

DeFi protocols also still have some functional flaws, including over-collateralization and the lack of a stop-loss function. However, Panigirzoglu noted that some DeFi protocols address these concerns.

Traders still choose CEX despite the risks

A study by ConsenSys showed this 99% Many cryptocurrency transactions still pass through centralized exchanges. Most traders still choose to deal with them and the counterparty risk that comes with them.

Managing accounts with multiple exchanges is also a problem, which is why many traders opt for third-party tools that allow them to trade on all their accounts from one place. one of these tools, CurrencyIt allows traders to trade on more than 20 platforms from its interface.

Tools like Coinigy allow traders to access more than 5,000 crypto assets and get the most advantageous trading conditions for each of them. Without these tools, traders would have to manage multiple CEX interfaces to find the best trading conditions for multiple assets.

Despite the limitations of CEX, the disadvantages of DeFi are currently a bigger problem for traders. Crucially, slow transaction speeds on DeFi put traders at a disadvantage compared to their counterparts on CEX.

Moreover, the transparency of transactions on the DeFi protocol is also an issue for traders, as Panijirzoglu explains. Traders do not want to make the entire history of their trading strategy available on the blockchain.

Finding the right platform to trade is, in the long run, one of the most impactful decisions a trader can make.



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