Despite Bitcoin and altcoin corrections, DEX volumes continue to surge

Decentralized finance (DeFi) began to take the cryptocurrency space by storm in 2021. DeFi helped push the bull cycle to a climax as traders took advantage of various ways to easily trade cryptocurrencies and earn high returns by holding them.

Ultimately, high fees on the Ethereum network and some sudden market sell-offs led to a pullback in token prices and DeFi transactions starting in late February, but that trend appears to have reversed over the past week as activity on decentralized exchanges has risen again.

DEX users and transaction volume comparison Source: DappRadar

As shown in the above figure, the trading volume of decentralized exchanges surged at the end of February, followed by a downward trend in the first week of April, with the total trading volume of all DEXs falling to $603 million on April 4.

The uptick in users in mid-March was driven in part by a surge in NFT popularity, and the end of that frenzy was marked by a sharp drop in users between March 26 and March 27.

Bitcoin’s decline ignites DEX activity

One possible explanation for the surge in activity on DEXs in recent weeks can be found by comparing Bitcoin’s volume and price graphs, which suggest a possible correlation between Bitcoin’s falling price and increased trading activity.

BTC/USDT 4-hour chart Source: TradingView

As Bitcoin price dropped from April 6 to April 8, DEX trading volume began to increase and peaked on April 7, just as Bitcoin price bottomed out and was about to rise again.

After reaching a peak of $64,840 on April 14, the price of Bitcoin began to fall and continued to fall until April 24, when the price of Bitcoin was still below $50,000.

DEX volumes increased significantly starting on April 18, the same day Bitcoin’s price retreated from $60,900 to $50,500, and have remained elevated since then, suggesting that traders may be leaving Bitcoin and moving into altcoins as the cryptocurrency enters what traders hope will be a brief correction.

DEX daily trading volume Source: Dune Analytics

As shown in the chart above, on April 22, as Bitcoin and the broader cryptocurrency market experienced a sharp drop, DEX daily trading volume reached its highest level in weeks, with the total market capitalization falling by more than $324 million.

With Bitcoin now struggling to re-enter the $50,000 support level and most altcoins now trading at ultra-low prices after retreating from recent highs, activity on decentralized exchanges could be a hint of an impending altcoin season, as Bitcoin has historically done when searching for direction after retreating from its all-time highs.

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