SINGAPORE — By the point Token2049 reconvenes subsequent yr, in the present day’s headline‑grabbing decentralized exchanges like Hyperliquid and Aster might not dominate, BitMEX CEO Stephan Lutz advised CoinDesk in an interview, warning that their incentive‑heavy enterprise fashions are too fragile to endure.
Lately, a aggressive battle has erupted within the perpetual decentralized trade (perp DEX) sector, with rising platforms like Aster and Lighter considerably difficult Hyperliquid’s former dominance.
Final week, Aster surpassed Hyperliquid when it comes to 24-hour buying and selling quantity. This has sparked a race amongst rivals to launch new DEXs, aiming to seize market share on this increasing subject.
On this context, Justin Solar introduced the launch of a brand new DEX on the Token2049 convention in Singapore, signaling additional intensification on this quickly evolving panorama.
The thrill, nevertheless, is more likely to be short-lived, in keeping with Lutz, who referred to as DEXs as inherent pump-and-dump schemes.
“DEXs are about giving entry to markets with out intermediaries, they usually construct momentum by relying closely on incentives, it’s principally an inherent pump‑and‑dump scheme,” Lutz stated. “I don’t imply that in a foul method or as a rip-off. It’s all public, you realize what you’re moving into.”
He likened the motivation packages to an promoting blitz that pays for consideration, explaining that these platforms hook customers with token rewards and price rebates after which depend upon that suggestions loop to maintain folks buying and selling.
“The query is, what sticks?” he continued.
This increase‑and‑bust cadence not solely makes it onerous for DEXs to retain liquidity over the long run, he added, it additionally means retail merchants chasing outsized yields are exposing themselves to appreciable volatility and threat.
In distinction to the churn he sees in DeFi, Lutz stated the biggest centralized exchanges, led by Coinbase and its friends, are well-positioned to journey out these cycles and stay dominant lengthy after the most recent DEX incentives subside.
He added that BitMEX’s aim is to straddle each worlds, noting that whereas he sees DeFi enduring and embraces it personally as a crypto native, establishments cannot work together with it like they will with a centralized trade.
BitMEX’s Tokyo pivot
The Japanese capital, not Hong Kong or Singapore, is the place the buying and selling quantity is, in keeping with Lutz.
In August, the trade formally moved its knowledge infrastructure to AWS Tokyo from AWS Dublin in a transfer aimed toward boosting liquidity. The change has delivered the specified outcomes, underscoring Japan’s attractiveness.
“We had been in Eire earlier than … nevertheless it grew to become an increasing number of tough as a result of principally everybody besides the U.S. gamers are within the Tokyo knowledge facilities,” he stated.
He stated the change boosted liquidity by roughly 80% in BitMEX’s principal contracts and as much as 400% in some altcoin markets, beneficial properties he attributed to not market-maker intervention however to decreasing latency by being in Tokyo.
Wanting in the direction of the subsequent crypto cycle
Lutz predicts the subsequent crypto cycle will look markedly totally different from prior booms and busts.
With better institutional participation, he stated, BTC may behave extra like a “actual asset,” smoothing out the dramatic peaks and troughs which have outlined previous runs.
“I anticipate that with better adoption we’ll see longer plateau phases than in earlier cycles; the market will nonetheless observe the identical guidelines and traits, however with decrease volatility because it turns into an actual asset embraced by the world’s rich,” he stated.
The bitcoin market volatility has declined markedly for the reason that debut of spot ETFs within the U.S. final yr. Furthermore, BTC’s implied volatility indices have steadily advanced into VIX-like buildings, shifting in the other way of spot costs.
All which means that though a few of these new DEXs, providing eye-watering leverage – which Lutz believes will not final till subsequent yr – there aren’t fireworks in retailer for BTC. As a substitute, it will appear to be some other refined asset class with gradual ups and downs because the market cycle continues.
