Despite 2023's Crypto Market Recovery, CEXs Keep Their Spot Trading Volumes From Falling

It has been quite an interesting year for the global crypto market. After enduring one of its most challenging years in 2022, crypto has been looking to make a significant comeback this year, and things appear to be starting off on the right foot.

The recovery in the market has also spilt over to centralized exchanges, which have been doing a good job of keeping their trading volumes up. And as coin prices are generally looking up, it seems to be a bumper time for exchanges in the market in general.

Market Rebounds As Economy Gains Strength

The crypto market has been on an impressive gaining spree in the past few weeks following significant gains in the traditional economy.

The biggest catalyst for gains so far has been inflation. Due to extensive quantitative easing measures taken at the height of the coronavirus pandemic, the United States has been dealing with a consistently rising wave of inflation in the past year. To combat this, the Federal Reserve has gone on a relatively aggressive campaign of hiking interest rates. The premise is simple - when interest rates are high, people and businesses will find it more difficult to borrow money. This means that spending will come down, and so will the prices of things.

Interest rate hikes significantly affected the prices of items across the board. And over time, it helped to curb inflation. For months now, inflation numbers - which are accessible via the Consumer Price Index (CPI) — have been dropping.

With dropping inflation, many analysts now believe that the government is in a good position to reduce interest rates, thus making it easier for people and businesses to borrow money again. This should favour risky assets especially since investors will be in a better position to back these assets in the long run. Although these interest rate cuts have yet to materialize, investors and analysts are significantly hopeful as things stand — and, crypto prices have been rebounding significantly.

In 2023 alone, coin prices have surged significantly. Major coins have seen double-digit gains, while several small-cap assets have jumped over 100% already. We’re still very much in the early parts of the year, but it is also looking like crypto could be in for a major rebound.

Exchange Volumes Spike

Thanks to the market rebound, there has also been a noticeable surge in the trading volumes witnessed by centralized exchanges. According to an analysis from Wu Blockchain, centralized exchanges saw especially higher trading volumes in January, with activity on these platforms surging across the board.

The report pointed out that spot trading on major exchanges jumped by 57.8% month-on-month in January. Ust as well, website traffic on the major centralized exchanges rose 4.5% in January over the previous month too.

Some of the exchanges that saw the biggest jumps include:

• Binance: The world’s largest exchange, it goes without saying that Binance saw significant inflows of traders. Many continue to trust Binance for its size and nifty features, and its position in the market continues to rise.

There is a general expectation that Binance will continue to be the world’s leading exchange going forward. The platform has built massive trust among its customers, thanks to its suite of expansive tools and features. And as customers continue to look for exchanges that they can trust, Binance will be a solid name for many of them. Nevertheless, it is worth noting that Binance could also be the subject of increased scrutiny - especially from regulators, who would want to ensure that its operations remain compliant. And with Binance hosting different products and services on its native platform, there will be a lot of opportunities for regulators to crack down on it.

• Coinbase: Coinbase has been the biggest beneficiary of the FTX saga. The company has seen more customers come in as many of them have been looking for regulated platforms that they can trust.

Coinbase benefits primarily from the fact that it has continued to maintain the right relationships with regulators. To date, it remains the only major crypto exchange whose stock is trading on a public exchange. With its base remaining in the United States and the company holding a tight regulatory hold, Coinbase has every reason to stand the test of time. Nevertheless, the same regulatory challenges and risks facing Binance could also be applied to Coinbase. The exchange already got on the bad side of the Securities and Exchange Commission (SEC) recently. What’s to say that this trend doesn’t continue and more investigations don’t come?

• Bitget: It may sound less familiar, but Bitget has proven itself as a top derivatives platform, and in this bear run, the exchange is going to make a big push in the spot market.

Bitget has several things going for it — particularly its strong focus on crypto derivatives and copy trading services. In 2022, Bitget was recognized as top three exchanges for derivatives volume in a report by the Boston Consulting Group. Additionally, after the collapse of FTX, Bitget witnessed the largest growth in market share in the derivative market, with its market share increasing from 3% to 11%.

Bitget is now aggressively expanding its the variety of digital assets with the drive to develop its spot sector, with a series of coin listing and the restart of the Bitget Launchpad. In the last two months, the platform listed over 50 promising blockchain projects. As of Feb 2023, Bitget has supported about 450 coins with over 580 trading pairs. And among top 10 spot trading platforms, Bitget ranks second in terms of the number of coins listed.

A clear indication of Bitget's sound financial health and business growth can be obtained from the impressive performance of its BGB token, which has tripled in value over the past year and has repeatedly set new all-time highs. Currently trading at $0.41, BGB has surged 300% over the last 12 months.

Bitget's first-mover advantage in derivatives trading and offerings hot-ticket spot items at the moment, are positioning it as a top contender in the competition landscape. As a result, investors seeking the best investment opportunities have more reasons to flock to its exchange platform. This makes Bitget a name to watch closely in the future.

• OKX: OKX is one of the best platforms for anyone looking to conduct sophisticated trading. It is more tailored to professional and institutional traders, offering an enabling environment and high liquidity for anyone looking to enjoy it.

Sophisticated crypto derivatives trading is one of the most lucrative parts of the entire industry. Over the years, more people have been looking to get into this industry as the potential profits are significantly higher than those who just trade regular cryptocurrencies. As a result, many have been looking to dedicated platforms that seem more tailored to derivatives. Interestingly, derivatives trading is one area where the now-defunct FTX exchange was especially good. In fact, the platform had more derivatives volumes than any other exchange saves for Binance. Now that FTX is no more, that market share is up for grabs. And, OKX could be next up.

• Upbit: Upbit is currently one of the biggest names in Asia’s crypto space. The platform has capitalized on the industry’s growth in China, providing them with a dedicated toolkit that allows them to buy, sell, and trade their favorite coins.

Upbt’s focus on the Asian market has been quite lucrative for the exchange. For one, Asians have shown a significant love for the crypto market in the past few years. And as markets in the region continue to mature, so have the appetites of cryptocurrency traders. Still, there is a risk for Upbit. Regulatory winds always change on the Asian continent, and it is possible that countries and governments develop a sour taste for crypto. China already banned all crypto activity in its country. If other Asian countries follow suit, Upbit could lose a lot of market share.

Noticeably, there was a significant exodus of traffic from centralized exchanges following the collapse of FTX — one of the biggest names in the market at the time. FTX had been a major player in crypto and had even pretty much helped to save several failing companies last year amid the bear market. While companies were failing, FTX was bailing companies out.

When FTX went under, investors were noticeably scared. Many of them got jitters and decided to move their funds to self-custody platforms instead, believing their money could be better protected. As a result, centralized exchanges saw outflows of funds worth billions of dollars during November and December. All of those volumes are now coming back.

Besides spot trading volumes, exchanges also saw a surge in crypto derivatives trading in January. Derivatives — essentially, financial products such as options, futures, and swaps that are based on an underlying asset — are usually reserved for the most sophisticated investors. Even though these investors make up only a small portion of the market, their volumes are considerably larger.

As Wu Blockchain noted, derivatives trading volumes on main exchanges surged by 47.6% in January from the previous month. However, the exchanges that got the most surges were:

• Phemex (190% surge)
• Bybit (98% surge)
• Gate.io (85% surge)

Several other large exchanges saw surging volumes as well, although it remains unclear how most of that was due to bot activity.