JPMorgan stated that centralized exchanges would continue to control the majority of global digital-asset trading volumes, despite the community expecting a huge shift towards decentralized exchanges (DEX).
According to JPMorgan strategist Nikolaos Panigirtzoglou and his team, slower transaction speeds, asset pooling, and order-traceability aspects of DEX are expected to restrict institutional participation.
The JPMorgan analysts team listed the lack of a limit order or stop loss feature on DEXs, their reliance on price oracles that draw data from centralized exchanges, etc would limit its adoption.
The susceptibility of these platforms to hacks and exploits, the requirement for over-collateralization, and systemic risks from the cascade of automated liquidations, also will act as a barrier to its expansion in a wider environment.
After the FTX crash, according to DefiLlama data, this month’s trade volume on decentralized platforms increased 68% from last month to $97.22 billion, the highest since May.
Many interpret that as the start of a long-lasting movement to transparency and an indication of declining reliability in centralized platforms. JPMorgan acknowledges the recent increase in DEX trading volume but does not believe it to be the beginning of a significant long-term trend.
As the FTX collapse triggered the need for crypto regulation, JPMorgan expects several new regulatory efforts, including those emphasizing custody, customer asset protection, and transparency in the near future.
