Decentralized exchanges, or DEXs, saw a massive $1.5 trillion in derivatives trading in 2024. This year, experts expect that number to more than double. Why? More investors are looking for cheaper and more liquid options than what centralized platforms offer.
According to the dYdX Annual Ecosystem Report 2024, DEX derivatives volumes jumped by 132% last year, hitting a record high of $1.5 trillion. In January, perpetual DEX volumes started at $81 billion and skyrocketed to $242 billion by December. If this growth continues, dYdX predicts total DEX volumes could reach an impressive $3.48 trillion by 2025.
DEXs are also becoming popular for spot trading. Their market share more than doubled, going from 9% to 20%. This surge reflects the current crypto bull market. Plus, DEXs attract users with low transaction fees and access to more speculative assets.
For example, trading volumes on Solana-based DEXs have exploded due to the recent memecoin craze. In early January, daily trading volumes on Solana DEXs actually surpassed the combined volumes of Ethereum and Base.
New U.S. reporting requirements could push even more users toward DEXs in the near future. Despite the pro-crypto stance of the new Trump administration, certain reporting obligations for centralized exchanges might lead traders to prefer DEXs.
Starting this year, the IRS will require centralized exchanges and brokers to report digital asset transactions. These rules will extend to DEXs by 2027. While the IRS claims this will help investors file accurate tax returns, some in the industry see it as overreach.
Anndy Lian, a blockchain expert, said, “There’s a real risk of pushing users toward decentralized platforms like Uniswap or PancakeSwap.” He pointed out that while decentralized systems have challenges with tax enforcement now, advancements in blockchain analytics and potential regulatory changes by 2027 could change the game.
The IRS reporting rules have faced significant pushback from the crypto community. In December, the Blockchain Association even sued the IRS, arguing that the agency has overstepped its authority and violated the Administrative Procedure Act.