Tokens on Binance Underperforming as Price Discovery Shifts to Decentralized Exchanges
Recent tokens listed on Binance are showing signs of underperformance compared to the broader crypto market, indicating that price discovery movements are now taking place on decentralized exchanges. Interestingly, traders are still utilizing centralized platforms to exit liquidity.
Analyst Ignas, known for his insightful market observations, has pointed out that Pudgy Penguins (PENGU) and ChainGPT (CGPT) are among the few recent listings that have not experienced a complete crash post-Binance listing.
PENGU is currently trading at $0.028, down 60% from its listing price of $0.07, while CGPT has only seen a 4.7% decline since its listing on Jan. 10. On the other hand, memecoins like Simon’s Cat (CAT) and Magic Eden’s ME token have plummeted by approximately 70% since their respective listings.
Ignas views this shift as a positive development for the market, noting that while centralized exchanges were traditionally used for price discovery and exit liquidity, decentralized exchanges now seem to be taking on the role of price discovery, with CEXs serving as exit points.
“Previously, price discovery occurred in private VC markets, with CEXs [centralized exchanges] as exit liquidity. Now, DEXs [decentralized exchanges] are for price discovery and CEX for exit liquidity.”
The recent listing of Velodrome (VELO) on Binance further illustrates this trend, with the token’s price plummeting by nearly 70% post-listing, currently trading at $0.1154.
The shift towards decentralized exchanges is driven by the influx of “smart money” traders on these platforms, according to Ignas. He also emphasizes the importance of having exit liquidity streams like centralized exchanges to maintain market health.
On-Chain Activity Reaches Record Levels
In December, decentralized exchanges witnessed a surge in monthly trading volume, reaching an all-time high of $434.4 billion, surpassing the previous peak by over $50 billion, as reported by DefiLlama data.
Moreover, decentralized derivatives markets also saw a new peak in trading volume during the same period, capturing nearly $341 billion in volume.
As of Jan. 13, decentralized exchanges accounted for the highest proportion of spot monthly trading volume compared to centralized exchanges. The DEX to CEX Spot Trade Volume ratio, calculated by The Block, indicates that DEXs have traded 16% of the total spot volume registered by CEXs in January. It remains to be seen how this ratio will fluctuate in the remaining weeks of the month.