The explosive track in the bull market: a summary of the decentralized derivatives market

Author: Riyue Xiaochu, member of Huzi Guanbi Source: X, @riyuexiaochu

If we talk about the tracks that will explode in the bull market, derivatives must be one of them.

We can roughly divide the tracks into two types, one is the conceptual type, which is a new concept and a new pie.

The other is the real growth of product data. In the bull market, trading is definitely one of them.

Take the contract trading volume of BTC in the last bull market as an example. From 1.58 billion in March 20, it reached a peak of 27.2 billion in April 21, and the trading volume directly increased by 17 times. In the bull market of 21 years, the surge in exchange platform coins such as BNB, KCS, and OKB, the logic is very simple, that is, the trading volume is surging.

1 The potential of the decentralized derivatives market

In centralized exchanges, contract trading volume has long exceeded spot trading volume. To give the simplest example, the spot trading volume of the entire network in the past 24 hours was about 50 billion US dollars, while the 24-hour contract trading volume was 150 billion US dollars. The contract trading volume is about 3 times that of the spot.

In the last bull market, a very important trend was the popularity of decentralized exchanges (DEX), such as Uniswap, Sushiswap, etc. After the experience of DEX, Binance OK Huobi and others first resisted it, then passively accepted it, and finally actively embraced it. In just one year, Uniswap's trading volume and market value in 21 years exceeded those of second-tier centralized exchanges.

In addition to spot trading, there are also derivatives in decentralized trading. However, in the last bull market, although some decentralized derivatives projects appeared, they did not develop much. The core reason is that the infrastructure is not perfect, because derivatives have higher performance requirements for the public chain. The user experience is always far behind that of centralized exchanges.

However, after the development of infrastructure in this cycle, as well as the continuous innovation and product iteration of members in the derivatives track, users can already enjoy a good product experience.

However, judging from the data, derivatives are still undervalued. Taking simple data as an example, the spot trading volume is 50 billion US dollars, while the 24-hour trading volume of dex, mainly Uniswap and Jupiter, is about 7 billion US dollars, accounting for about 14%. In contrast, the contract trading of centralized exchanges is 150 billion US dollars. For decentralized contracts, the trading volume is 8 billion US dollars, accounting for only 5%.

From the perspective of market value, Uniswap's daily trading volume is about 2.5 billion US dollars, the circulating market value is 6.3 billion US dollars, and the FDV is 10.6 billion US dollars. The daily trading volume of dydx is 1 billion US dollars, the circulating market value is 1.1 billion US dollars, and the FDV is 1.5 billion US dollars. If calculated with Uniswap's trading volume, it is at least underestimated by 2 times.

So in general, the current trading volume of the decentralized derivatives track has not really been brought into play, and there is at least 3 times more potential compared with spot. At the same time, when the bull market comes, the trading volume of all kinds of transactions in the entire market may have more than 10 times the growth potential.

2 Main members of the derivatives track

In the decentralized derivatives track, the more famous names are dydx and GMX.

dydx is a long-established decentralized derivatives market that uses the order book matching transaction method, which is the same as the centralized exchange. When the token was launched in 2021, it made many people rich. It uses low fees, deep liquidity and up to 20 times leverage, and supports 67 cryptocurrencies. V4 is a Layer 1 public chain built on Cosmos.

dydx has always adopted a trading reward format, which is equivalent to trading mining. The trading volume has been in the top three for a long time, with a daily trading volume of about 2 billion US dollars. The circulating market value is 1.1 billion US dollars and the FDV is 1.5 billion US dollars

GMX originated from Arbitrum, and its innovation is to use the AMM mechanism. It references the LP pool. Unlike traditional matching transactions, there are no buyers and sellers as counterparties on GMX. Instead, it conducts counterparty transactions with the LP pool, and LP providers can obtain transaction fees, MM fees, etc. GMX once became the largest trading volume in 2022 and 2023, and it has high hopes. However, with the continuous emergence of outstanding players in the decentralized derivatives track, GMX is now often surpassed by many projects.

GMX's daily trading volume is now around 200 million to 500 million, and GMX's current circulating market value is 320 million US dollars.

SynFutures

What caught our attention was SynFutures, which is at the top of the trading volume list. Its 24-hour trading volume is 300 million US dollars more than the second-ranked dydx.

SynFutures' trading volume

According to DefiLlama's data, SynFutures' data has improved significantly since March this year. An important time node is that SynFutures released the V3 protocol on February 29. From the data, we can see that SynFutures' daily trading volume for the entire 23 years was basically in the range of 15M~30M.

Since March 24, the daily trading volume has begun to increase significantly. First, it increased to about 80M, and then reached about 300M in late March. Since April, the daily trading volume has increased to 1B, which is 30~60 times that of last year. The highest daily trading volume reached 1.7B.

From the data, we can see that SynFutures' daily trading volume is not stimulated by some favorable factors in a short period of time. Instead, it has been at a very high position since April.

This series of beautiful data from SynFutures made me study it carefully. The V3 version mainly launched the Oyster AMM (oAMM) system specially built for contracts, which has two major advantages behind it.

The first major advantage is that it can achieve a separate liquidity pool for each derivative trading pair, which will not lead to global systemic risks. And it can allow liquidity to be concentrated in a specific price range like Uniswap V3 and Maverick. It greatly improves the utilization rate of funds and increases trading depth. From the data, the ratio of SynFutures' trading volume to TVL is as high as 19.48, far exceeding dydx's 2.68 and GMX's 0.34.

The second major feature of SynFutures is that anyone can use any ERC 20 token as a margin on any EVM chain and complete the entire listing process in just 30 seconds. In my opinion, this has great potential in the future.

Speaking of this, let's talk about the reasons for Uniswap's success.

In the last bull market, the decentralized exchange Uniswap achieved a big leap forward. In just one year, the trading volume went from obscurity to approaching that of first-tier exchanges. Most people may attribute it to the inevitable trend of decentralized trading, but I disagree. The real reason is that it allows anyone to list and trade freely.

Let us recall that before the emergence of dex, a coin needed to be traded, even on a small exchange, requiring BD, submitting materials, waiting for review responses, etc., not to mention the exchange's listing fees and various requirements, just the process takes a long time. And in uniswap, it only takes 1 minute, and you can trade after forming an LP. So the emergence of dex has brought great convenience. In the bull market, a large number of new projects emerge every day, and uniswap naturally becomes the first choice.

Therefore, the permissionless listing function in the bull market is a king-level function. Now only SynFutures has this track, which may become a weapon to take it to the next level in the future.

Summary:

In this bull market, the derivatives track must be paid attention to. It is certain that the trading volume of this track has increased by at least 10 times in the bull market, which is a real improvement in fundamentals. In derivatives, there are many competitors, and the old brands include dydx and gmx, which are still undervalued compared to spot.

SynFutures, the champion of trading volume in recent months, is also worthy of special attention. It has not yet issued a coin, and the wool party can participate in advance. After all, dydx made a lot of people rich. SynFutures, which has raised more than 36 million, is also sought after by leading institutions such as Pantrea and Dragonfly.