Trading volume for Uniswap and Sushiswap Decentralized Exchange more than doubled as Binance and Coinbase exchanges crashed, preventing users from interacting with their crypto holdings.
The world’s two largest cryptocurrency exchanges, Binance and Coinbase, suffered from service outages on May 19th, having a considerable impact on Bitcoin’s value at the time when it dropped by about $9K.
The service outages are not new for these centralized cryptocurrency exchanges, especially given the high traffic they have experienced over the past 24 hours as users flood the platform while trying to navigate the current volatility of the crypto market.
According to Fortune, more than 775k traders had their accounts liquidated over the last 24 hours due to drops that forced their positions closed, accounting for over $8.5 billion worth of cryptocurrency.
Binance and Coinbase Take Hit With Bitcoin
Earlier on Wednesday, Binance announced that Ethereum withdrawals had been disabled due to network congestion.
This issue has been increasingly painful over the past year as the network fails to handle the increasing volume, which has also resulted in high prices.
Coinbase, on the other hand, reported “intermittent downtime” on the platform, which they assure their users it was investigating.
The Service Outage’s Impact on the Market
Soon after the outages, Bitcoin experienced a drop of about $9k, reaching its lowest value since early February by going as far as reaching a $30k valuation, according to Coingecko data.
The drop represented a 30% loss in value and around $500 billion in its market capitalization, but the most popular cryptocurrency soon started recovering from the drop.
By the end of the day, Bitcoin had recovered by reaching the $38k mar, a similar value to the one it had before the sudden drop.
Ethereum suffered a similar fate by dropping from $2.7k to $2k in just an hour, just to start recovering as the situation normalized and investors jumped at the opportunity to “buy the dip”.
Slow Speeds Impact Liquidity
The performance issues experienced by the two centralized exchanges didn’t only hurt the performance of the two biggest cryptocurrencies by market capitalization but also allowed cryptocurrency critics to point at the failures of crypto infrastructure by claiming it was unable to handle the rising popularity.
This could be a potential issue for the public image of crypto, especially at a time when with all eyes set on it, its market capitalization has dropped by over 7% in the last 24 hours, according to Coingecko data.
Decentralized Exchanges Were the Winners
Decentralized Exchanges (DEXs) have been gaining popularity and momentum over the past year as they have become a real alternative to centralized exchanges, which ruled the cryptocurrency ecosystem for a long time.
One of DEX’s strongest selling points is their distributed nature, which allows them to perform efficiently and reliably by removing single points of failure which could cause outages like the ones experienced by Binance and Coinbase.
This advantage was reflected in the performance of DEXs like Uniswap and Sushiswap, which experienced the highest trading volume in the last 7 days as a result of the Coinbase and Binance outages.
According to Coingecko data, Sushiswap’s exchange trading volume increased from $1.2 to $3.6 billion, while Uniswap saw an increase from $1.7 to $3.8 billion, an increase of more than 100% in both cases.
New Reasons to go Decentralized
Centralized exchanges were an essential part of the increasing success of crypto in previous years by allowing users to transform fiat into crypto while offering a friendly user interface and a high number of security measures perfect for new investors.
However, they have been losing popularity among older investors who see DEXs as a better alternative in terms of fees, performance, and investment opportunities.
With DeFi and other applications of blockchain continuing to emerge, the whole ecosystem seems to be more attracted to platforms that operate closer to the original Ethos of crypto, which has caused a “conflict” of sorts between the philosophy and ease of use when it comes to blockchain platforms.