Limitations of Centralized Grid Trading

Grid trading is a systematic trading strategy that involves placing a series of buy and sell orders within predetermined price ranges, creating a grid-like structure. The main goal of this strategy is to profit from market fluctuations without needing to predict specific market directions. Due to its ability to efficiently capture market volatility, grid trading has become widely used in the cryptocurrency market. Major centralized exchanges (CEXs), such as Binance, have launched their own grid trading bots to meet trader demand.

Despite the rapid growth and popularity of centralized exchange grid trading, it has several significant drawbacks:

• Limited Trading Pairs: Centralized exchanges typically support only a limited range of trading pairs, particularly for emerging, high-volatility assets like meme coins, which can experience 10%-20% fluctuations in minutes. Many CEXs do not offer these trading pairs.

• High Trading Fees: Trading fees on centralized exchanges are typically around 0.1%, which can erode grid profits, especially in high-frequency trading.

• Low Capital Utilization: Since centralized grid trading requires placing limit orders in advance and waiting for price triggers, funds allocated to orders far from the current market price remain idle, resulting in poor capital utilization.

• Lack of Full Control: On CEXs, users do not have complete control over their funds, which increases risks and reduces transparency.

By bringing grid trading to decentralized exchanges (DEXs) and integrating concentrated liquidity and lending protocols, users will gain access to more trading pairs while earning trading fees instead of paying high fees. Additionally, idle funds can earn interest through lending protocols.