Price Discovery Dynamics Between Decentralized and Centralized Cryptocurrency Exchanges: An Empirical Analysis of Lead-Lag Relationships and Market Efficiency

This paper presents a comprehensive empirical analysis of price discovery dynamics between decentralized exchanges (DEXs) and centralized exchanges (CEXs) in cryptocurrency markets. Using 1-minute OHLC data from September 4-5, 2025, I analyze 5,000 DEX data points and 3,670 CEX data points across Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) from Binance, Coinbase, and multiple DEX protocols via Bitquery's Crypto Price API. The analysis reveals remarkably strong price correlations (0.98-0.99) and exceptionally low mean absolute percentage deviations (0.06-0.08%) between DEX and CEX markets, indicating highly efficient price transmission. Lead-lag analysis shows mixed patterns: Bitcoin demonstrates CEX leadership with 5-minute leads across both exchanges, while Ethereum and Solana exhibit DEX leadership, with Solana showing particularly strong DEX dominance (40-minute lead with Binance). Volume analysis reveals significant disparities, with Binance showing 1.71x higher volume for Bitcoin but comparable or lower ratios for ETH (0.78x) and SOL (0.51x). These findings challenge traditional assumptions about CEX primacy in price discovery, particularly for newer tokens, and suggest that DEXs are becoming increasingly important for price formation in the evolving cryptocurrency market structure. The research provides quantitative evidence for the growing role of decentralized exchanges in cryptocurrency price discovery and has implications for arbitrage strategies, market surveillance, and regulatory frameworks.