Welcome to the deep-dive into one of the most pivotal evolutions in crypto markets for 2025: the battle between centralized exchanges (CEXs) and decentralized exchanges (DEXs), fought in the realm of liquidity. At SorooshX we believe understanding how liquidity flows and where it resides is central to navigating crypto’s next chapter. This blog unpacks the state of play in 2025, the structural drivers, what’s at stake for users and institutions, and how you can position accordingly.
What we mean by “liquidity wars”
Liquidity means the ease with which an asset can be bought or sold without significantly affecting its price. In crypto, liquidity is critical: depth of order books, tightness of spreads, speed of execution, and resilience under stress all hinge on liquidity. The “wars” between DEX vs CEX aren’t simply ideological — they’re economics, infrastructure and power-plays. In this blog we’ll examine:
- How CEXs currently dominate liquidity (but are under pressure)
- How DEXs are evolving to capture more of that liquidity pie
- Where the fault-lines are in 2025: regulatory, technological, capital structure
- What this means for you — whether retail trader, liquidity provider (LP) or institutional.
1. The CEX Liquidity Advantage — So Far
Why CEXs traditionally win on liquidity
- CEXs host large central limit order books, with institutional market-makers, deep pools and efficient matching engines. As noted in an industry piece: “while CEXs offer deep liquidity …”
- For many users, fiat on/off-ramps and established trust make CEXs the default. A comparison article states: “For ease of use, fiat support, high liquidity, and speed → CEX wins.”
- Execution speed and user experience: centralized logic means orders are processed off-chain, regardless of blockchain congestion.
But cracks are appearing
- Liquidity is becoming more fragmented. On-chain venues, alternative chains (L2s/alt-L1s) and DEX protocols are siphoning volume. According to one report: “the DEX/CEX ratio set new highs in 2025 (peaking 23% in spot and 9% in futures)”.
- Some CEXs are under regulatory and trust pressure, which undermines their moat. This matters deeply for liquidity: if users fear withdrawal or freeze risk, they pull capital and depth evaporates.
- Even among CEXs, liquidity for alt-coins is thinning: spreads widen, order-book depth narrows.
Key takeaway for SorooshX readers
If you trade large volumes, value speed, depth and fiat rails, a top-tier CEX remains compelling — but the “safe bet” is no longer guaranteed. You need to monitor depth (order-book size, average spread) and be aware of contagion risk when liquidity dries up.
2. DEXs Rising: Seizing Liquidity Ground
What’s new in DEX land in 2025
- DEXs are no longer just “for small trades” or niche tokens. The rise of on-chain derivatives, higher sophistication in AMM design, and multi-chain routing improvements mean DEXs are now credible alternatives. For example, research by Grayscale Investments found that average spot fees on DEXs were comparable with CEXs in early 2025.
- Liquidity pools and automated market-maker (AMM) models are evolving. Academic work shows new AMM frameworks that retain liquidity far better under volatility.
- Permissionless listing, composability (i.e., DeFi stacking of protocols) and self-custody appeal are pulling particular user-segments into DEXs.
The liquidity challenge for DEXs
- Fragmentation: Liquidity is spread across many chains, pools and protocols — meaning depth suffers for any given token/trade. As one article warned: “fragmentation across L2s/alt-L1s and venue silos spreads order flow thinly.”
- Slippage and gas/transaction costs: For smaller trades, or during network congestion, DEXs can be inefficient.
- Institutional volume: Many large traders still prefer CEXs for size, risk controls, fiat flows — meaning DEXs must keep evolving.
How to use DEX liquidity
- If you value self-custody, early-stage token access, yield-farming style opportunities — DEXs are increasingly viable.
- But for large block trades, or strategies dependent on minimal slippage, inspect the pool depth, token-pair volume and chain congestion before assuming parity.
- Use hybrid strategies (explained below) to combine both worlds.
3. The Liquidity Warfront: 2025 Structural Drivers
Here’s where SorooshX zooms in on the key dynamics reshaping liquidity in the DEX vs CEX context.
3.1 Regulatory & Trust Impacts
- CEXs operate under KYC/AML regimes, regulatory oversight, and carry higher legacy “custody risk” (e.g., the collapse of FTX still looms in market consciousness).
- DEXs remain permissionless, borderless — appealing when regulatory regimes tighten. But they are not immune: regulators are increasingly scrutinising smart-contract risks, operator responsibilities, listings and cross-chain compliance.
- What readers should ask: how will regulation affect liquidity flows? When institutional capital avoids unregulated venues, liquidity shifts.
3.2 Technology & Infrastructure
- Layer-2s (L2) and alt-L1s reduce costs and latency for DEXs, enabling deeper liquidity and better UX.
- Advanced AMM designs (dynamic fees, power-law invariants) are enhancing DEX resilience under volatile conditions.
- Cross-chain liquidity bridges and aggregation protocols matter: the ability for a DEX to source liquidity across chains directly affects depth and slippage.
- Tech wins will underpin liquidity leadership. Venues that integrate superior routing, cheaper execution and deeper LP incentives will pull share.
3.3 Capital Flows & Behavioural Trends
- According to CCN, stablecoin growth in 2025 has absorbed tradable liquidity, meaning less active capital is deployed into altcoin trading.
- DEXs are gaining share: one article reported that DEX spot volume quadrupled from early 2024 to mid-2025.
- However, institutions (with large capital) still gravitate to CEXs for access, custody, fiat ramps. The liquidity war hinges on how rapidly DEXs reduce that gap.
4. The Liquidity Scorecard — CEX vs DEX in 2025
| Metric | CEX Strengths | DEX Strengths |
| Depth of liquidity/order-book | Very high for major tokens/pairs | Increasingly competitive for popular pools, but more fragile |
| Execution speed & UX | Excellent — mature UI, fiat rails, margin/derivatives | Improving rapidly with L2, but still some UX friction |
| Custody & risk | Centralised custody (pros and cons) | Self-custody gives control, but user bears risk |
| Token listing / access | Selective, gate-kept | Permissionless listing gives access to niche/new tokens |
| Cost / slippage for small trades | Typically lower slippage | Slippage depends on pool depth and network conditions |
| Regulatory/regime risk | Higher regulatory exposure | More decentralised, but not free from oversight |
| Liquidity fragmentation | More unified | More fragmented (many chains/pools) |
In 2025, there is no clear “winner”. Rather, the winner will be the platform (or strategy) that best blends strengths and mitigates weaknesses.
5. Strategy and Playbook for SorooshX Users
Hybrid approach
As many analysts now suggest: Use CEX for fiat/crypto conversion, large-volume trades and derivatives, and DEX for self-custody, yield strategies, early-stage tokens and permissionless exposure.
This hedges risk, capitalises on liquidity where it lies, and positions you across the evolving terrain.
Key questions to ask before choosing venue
- Depth matters: How large is the order book (CEX) or pool (DEX) for your token/trade size?
- Slippage & gas cost: On a DEX, will network/gas costs eat into your trade? On a CEX, will withdrawal or execution delays matter?
- Token access: Is the token listed on CEX? If not, you’ll need DEX liquidity and be comfortable with additional risk.
- Custody & risk appetite: Are you comfortable holding keys (DEX) or prefer exchange custody (CEX)?
- Regulation & jurisdiction: Does your jurisdiction limit CEX access? Does anonymity matter to you?
- Exit strategy: Especially for emerging tokens on DEXs, how will you exit? Liquidity may thin rapidly.
Spot vs Derivatives liquidity focus
- Spot: Both CEX and DEX volumes are rising; DEX share reached ~20%+ of spot volume in some months in 2025.
- Derivatives: CEX still leads, but DEX perpetuals platforms are gaining traction — thereby impacting the highest-margin segment for exchanges.
For SorooshX traders engaging perpetuals, check the trading venue’s depth, leverage settings, liquidity pool composition, and chain risk.
6. Risks and Traps to Watch
- Liquidity black-holes: On DEXs, when markets wobble, fragmented pools may collapse in depth, causing slippage or execution failures. E.g., the “Black Swan” crypto crash in October 2025 showed DEXs having high slippage and CEXs experiencing outages.
- MEV and arbitrage extractions: On both CEX and DEX, searchers and MEV (miner/validator extractable value) actors are profiting from inefficiencies. Research shows large extracted value from CEX-DEX arbitrages.
- Regulatory shocks: A sudden regulatory clamp on a CEX can drain liquidity rapidly. Conversely, a smart-contract bug in a DEX can evaporate user confidence and liquidity.
- Token unlocks and supply pressure: Especially in altcoin pools on DEXs — token unlock calendars can add persistent selling pressure, thinning liquidity.
7. Outlook: What SorooshX Predicts for the Next Phase
- Convergence into hybrid “CeDeFi” models: We expect more platforms that blur CEX/DEX boundaries — non-custodial wallets tied to fiat on/off ramps, centralized firms offering on-chain access, etc.
- Liquidity aggregation and composability wins: Platforms that can pull liquidity across chains/pools, minimise slippage and gas friction will dominate the DEX side.
- Institutional capital’s shifting terrain: Institutions will demand deeper, safer pools, regulated access to on-chain liquidity — pushing DEX infrastructure to a higher bar.
- Token-centric liquidity flywheels: DEXs that can incentivise liquidity providers with native token rewards, integrate with DeFi yield ecosystem, will capture more of the “long tail” liquidity.
- Fragility remains: Despite improvements, liquidity wars in 2025 remain cyclical. In high-stress moments (macro shock, regulatory surprise), liquidity depth is still thinner than traditional finance. Hence the “war” metaphor — the field is contested.
Conclusion
At SorooshX, we emphasise that liquidity is the lifeblood of crypto markets — and in 2025 the battle between CEXs and DEXs is real, not hypothetical. For traders, LPs, institutions and users alike, understanding where liquidity resides, how it's shifting and what tools you deploy matters more than ever.
– Use CEXs when you need speed, large size, fiat rails.
– Use DEXs when you prioritise self-custody, access to emergent tokens, composability.
– As liquidity fragments and flows across chains, a hybrid mindset wins.
– Always check depth, slippage, token listing status, and risk profile.
– And remember: evolution continues — tomorrow’s winner may be the platform that bridges-rather-than-chooses.
Thanks for reading this deep-dive blog. Stay tuned to SorooshX.com for more insights as the liquidity saga evolves.
Disclaimer: The content here is for informational purposes only and does not constitute financial or investment advice. Crypto markets are highly volatile and you should do your own research.