An analysis by Kaiko has found that eight major cryptocurrency exchanges dominate the global digital asset trading scene. These exchanges account for 90% of global trading volume and possess 92% of the market depth. Since the onset of 2023, Binance has been particularly dominant, making up over 30% of the market depth and 64% of global crypto trading volumes.
The exchange, led by Changpeng Zhao, has continued to be a significant force in the digital asset market, although its market depth has dipped by about 12% since 2021. Other key players in the cryptocurrency exchange landscape are Coinbase, Kraken, OKX, KuCoin, Bybit, Binance.US, and Bitfinex, listed in decreasing order of their market share.
This centralization of trading volume has seen an increase of nearly 6% compared to 2021, where the top eight exchanges managed just over 84% of all global crypto trades. Kaiko’s Director of Research, Clara Medalie, attributes this concentration to “natural market forces,” which she believes benefit the average cryptocurrency trader.
However, Medalie also warns that having such a concentrated market poses risks. This was exemplified by the collapse of FTX in 2022, leading to significant losses for crypto investors and causing many to exit the market.
High market concentration brings both pros and cons. While it centralizes liquidity, this could make the market vulnerable to extreme volatility and hamper the process of price discovery.
The release of Kaiko’s analysis coincides with the most significant drop in crypto trading volumes for the year, as reported by CCData. Both spot and derivative trading volumes fell more than 11% in August, totaling $2.09 trillion, marking it as the second-worst monthly performance since October 2020.