TY - JOUR
T1 - Decentralized exchanges
T2 - The “wild west” of cryptocurrency trading
AU - Aspris, Angelo
AU - Foley, Sean
AU - Svec, Jiri
AU - Wang, Leqi
PY - 2021/10
Y1 - 2021/10
N2 - Cryptocurrencies are traded on two types of exchanges – centralized and decentralized. Although trading in the largest cryptocurrencies primarily occurs on centralized exchanges, most newly issued tokens can only be exchanged using decentralized platforms. Volumes in these decentralized exchanges (including automated market makers) has recently increased exponentially. We examine the role of this new and unmonitored market, utilizing an extensive sample of tokens exclusively traded on decentralized platforms. We show significant differences in the listing and trading characteristics of these tokens relative to their centralized equivalents. A small selection of these tokens obtain listing on a centralized exchange during the sample period, which is accompanied by a significant increase in trading activity, consistent with market segmentation. A centralized listing results in a migration of volume away from decentralized platforms, revealing a strong preference by tokenholders for deeper and more liquid markets over the increased security and anonymity offered by decentralized exchanges.
AB - Cryptocurrencies are traded on two types of exchanges – centralized and decentralized. Although trading in the largest cryptocurrencies primarily occurs on centralized exchanges, most newly issued tokens can only be exchanged using decentralized platforms. Volumes in these decentralized exchanges (including automated market makers) has recently increased exponentially. We examine the role of this new and unmonitored market, utilizing an extensive sample of tokens exclusively traded on decentralized platforms. We show significant differences in the listing and trading characteristics of these tokens relative to their centralized equivalents. A small selection of these tokens obtain listing on a centralized exchange during the sample period, which is accompanied by a significant increase in trading activity, consistent with market segmentation. A centralized listing results in a migration of volume away from decentralized platforms, revealing a strong preference by tokenholders for deeper and more liquid markets over the increased security and anonymity offered by decentralized exchanges.
KW - Cross-listing
KW - Cryptocurrency
KW - DeFi
KW - Decentralized exchange
KW - ICO
KW - Tokens
UR - http://www.scopus.com/inward/record.url?scp=85111751908&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2021.101845
DO - 10.1016/j.irfa.2021.101845
M3 - Article
SN - 1057-5219
VL - 77
SP - 1
EP - 10
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 101845
ER -