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Huobi DeFiLabs Weighs DEXs against CEXs

Monday 8 February, 2021


LONDON,
Feb 8, 2021,
Huobi DeFiLabs, one of the leading DeFi research, investment and
ecosystem building platform has recently released a report on the
market scenario and performance of these on-chain derivatives.


Published
earlier today, the Huobi
DeFiLabs report compares
spot and derivatives trading volumes on both centralized and
decentralized platforms to identify the prevailing trends when it
comes to crypto trading and make market cap projections. The
platforms considered for this exercise are Huobi Global – a
centralized crypto spot and derivatives trading platform, Uniswap for
decentralized spot trading and dYdX decentralized derivatives
platform.


It
was found that during a 6-month period from Aug 6, 2020 to Feb 1,
2021, the daily trading volumes on DEXs, represented by Uniswap
registered a 3.6x increase as against 1.6x increase in spot trading
volumes on CEXs, as represented by Huobi Global Spot Markets. The
study also found that derivatives trading is more popular on
centralized exchanges than their decentralized counterparts, not to
mention the absence of any direct correlation between spot and
derivatives volumes on DEXs.




Comparison
of Huobi Spot, Huobi Derivatives, Uniswap, and dYdX Trading Volumes








According
to available data, spot trading on Huobi was about 19% of its
derivatives trading volumes, whereas spot trading on Uniswap was 331%
more than decentralized derivatives trading on dYdX. The distribution
of volumes between spot and derivatives on CEXs is almost consistent
across top 5 platforms, with derivatives trading 4.82 times the spot
volumes. On the day DEXs reach parity with CEXs, average derivatives
trading volume on dYdX based on Uniswap’s performance in the past
30 days is projected to hit $4.7 billion.


The
Huobi
DeFiLabs report indicates
that among decentralized derivatives perpetual swap protocols
continues to lead, with volumes worth $67.7 million. Based on the
earlier projection, perpetual swap offerings have the potential to
grow 50 times the current size. At present, there are 5 decentralized
perpetual contract trading protocols – dYdX, DerivaDEX, Perpetual
Protocol, FutureSwap and AlphaX, all with their own strengths and
shortcomings. However, they all face one common issue which is
shortage of adequate liquidity. Only FutureSwap using vAMMs and AMMs
with low slippage liquidity mining seems to do a bit better than the
rest. The shortage of liquidity on the rest is attributed to a higher
percentage of market-place orders from short-term traders, resulting
in increased deviation from latest prices.




Trading
statistics of major decentralized perpetual swap protocols


Considering
the average daily trading volumes and transaction counts, the Huobi
DeFiLabs report concludes that Perpetual Swap is best suited for
retail investors whereas dYdX and FutureSwap are favorable to
professional traders and large investors with on-chain hedging needs.


In
conclusion, Huobi DeFiLabs reports that decentralized perpetual swap
protocols are gradually gaining ground as popular DeFi trading
products. But only if significant changes happen in terms of
user-friendliness, liquidity provisions and network efficiency of
these platforms. These changes can be brought about by



As
DeFi catches on, these proposed improvements are expected to happen
in due course, maybe much sooner than everyone expects. Once in
place, it could slowly shift the usage trend from centralized
platforms to decentralized ones.


Read
Huobi DeFiLabs’ full
report here



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