WHY Do Exchanges Prefer Us to Deposit Funds on CEX Instead of Using DEX?

In the crypto world, CEX and DEX coexist, but it’s easy to see: every centralized exchange (CEX) is doing everything possible to get users to deposit funds into their system. This is not accidental; it’s a core strategy to maintain control, profits, and market power.
Here are the real reasons.
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1. Trading on CEX is off‑chain → the exchange has full control
When you trade on a CEX:
• No transactions are recorded on the blockchain
• No one outside the exchange knows what you trade or how much volume
• The exchange only updates internal balances
This gives them absolute control:
• They decide the order matching prices
• They decide the displayed liquidity
• They decide the order of trades
• They can collect user data to analyze behavior
On DEX, all transactions are on‑chain, transparent, and cannot be manipulated.
CEXs don’t want that.
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2. CEX makes money from huge trading fees
CEXs rely on:
• Trading fees
• Funding fees
• Withdrawal fees
• Margin fees
• Futures fees
• Token listing fees
To maximize profits → they must keep users trading continuously within their system.
DEXs also charge fees, but:
• Fees are shared with (liquidity providers)
• Transactions are transparent
• No “house edge” model
CEXs don’t like sharing that slice of the pie.
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3. CEX holds your funds = they have enormous liquidity to operate
When you deposit funds into a CEX, you are:
• Lending them free liquidity
• Helping them operate as market makers
• Helping them maintain a deep order book
• Providing capital to expand their products
The more money CEXs hold, the stronger they are → the more they attract users.
DEXs do not hold your funds.
You keep your assets in your wallet → they cannot use them.
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4. CEX can “optimize” prices and liquidity as they wish
Since trading is off‑chain, CEXs can:
• Adjust displayed prices
• Create fake liquidity
• Match orders internally
• Create spreads at will
• Intervene during volatile market conditions
On DEX, everything is on‑chain → impossible to “optimize.”
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5. CEXs find it easier to manage users
When you deposit funds into a CEX:
• They know who you are (KYC)
• They know what you trade
• They know how much you hold
• They can lock your account if needed
• They can limit withdrawals
CEXs prefer this level of control.
DEXs cannot do this — you hold your private key, you are the owner.
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6. CEX creates a closed ecosystem
Once you deposit funds into a CEX, they will:
• Suggest trading futures
• Suggest staking
• Suggest copy trading
• Suggest buying on launchpads
• Suggest using their Visa card
• Suggest borrowing on margin
All of these generate revenue.
DEXs cannot “upsell” users in this way.
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Conclusion: CEX wants you to deposit funds because that’s their lifeblood
CEXs are powerful because:
• They control liquidity
• They control data
• They control transactions
• They control user assets
• They profit from every activity in the ecosystem
DEXs are strong because:
• They are transparent
• They are decentralized
• No third-party trust needed
• You hold your assets
But because DEXs empower users, CEXs will never want you to leave them.