Trust Dynamics in Cryptocurrency Markets: Centralized vs. Decentralized Exchanges

Xintong Wu, Wanlin Deng, Yutong Quan, Lin William Cong and Luyao Zhang

Papers from arXiv.org

Abstract: Trust mechanisms diverge between centralized and decentralized exchanges, representing distinct sociotechnical governance paradigms. However, quantifying trust dynamics and their redistribution between these architectures remains empirically challenging, limiting understanding of how institutional shocks affect market behavior. The FTX collapse offers a natural experiment to bridge this gap. Through an interdisciplinary approach combining causal inference and computational text analysis, we find significant price declines and capital reallocation from centralized to decentralized exchanges following the event. While sentiment metrics showed no sharp discontinuities, topic modeling and network analysis of Discord communities reveal that seasonal holiday discourse obscured underlying trust concerns in centralized exchange forums. These findings underscore the fragility of institutional trust architectures and demonstrate how mixed methods can illuminate behavioral patterns during systemic crises, offering insights for exchange risk management and regulatory assessment.

Date: 2024-04, Revised 2026-05
New Economics Papers: this item is included in nep-ban, nep-mst and nep-pay
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