JPMorgan Calls Central Crypto Exchange (CEX) Will Dominate In The Future

JAKARTA The bankruptcy of the FTX exchange giant reduces consumer confidence in the centralized crypto exchange (CEX). This is said to increase users of decentralized crypto trading or DEX. Even so, the investment bank JPMorgan said that CEX will remain dominant in the future.

Previously, JPMorgan had revealed that FTX bankruptcy came from a centralized entity. A statement related to CEX's dominance in the future was made by Nikolaos Panigirtzoglou, a JPMorgan analyst. He admits that he is skeptical about the transition of consumers from CEX to DEX.

"We are skeptical of the structural shift from the centralized exchange (CEX) to the decentralized exchange (DEX)," said Panigirtzoglou.

According to DailyHodl, most pricing discoveries are still happening on centralized exchanges, and DeFi (decentralized finance like DEX) protocols rely on oracles that acquire price data from them. In addition, DeFi still has a greater risk of hacking and exploitation. Chainalysis estimates a combined loss of US$3 billion across DeFi by 2022.

The DeFi protocol also still has some functional weaknesses, including excess guarantees and lack of stop-loss functions. However, Panigirtzoglou points out that some DeFi protocols are addressing this issue.

Meanwhile, analytic firm ConsenSys explained that 99% of crypto trading is still through a centralized exchange or CEX. Most traders still choose to use the centralized crypto trading platform and the risks of the opposing parties accompanying it.

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

Not only that, Coinigy allows traders to access more than 5,000 crypto assets and gain more favorable trading conditions for each. Without this tool, traders will have to manage a number of CEX interfaces to find the best trading conditions for many crypto assets.

Despite CEX's limitations, DeFi's current shortage is a bigger problem for traders. Critically, the slow pace of transactions in DeFi has harmed traders compared to their CEX counterparts.

In addition, transparency of transactions on the DeFi protocol is also a problem for traders, Panigirtzoglou explained, traders do not want a complete record of their trading strategy to be available on the blockchain.