These Are the Top 2 Candidates for the Decentralized Derivatives ‘Throne’

Two leading decentralized derivatives platforms, dYdX and GMX, compete directly in terms of liquidity and trading volume.

According to CoinGecko, daily perpetual swap volume on dYdX ranged from $340 million to $2.6 billion in March. In comparison, GMX recorded just under $500 million.

Open interest (OI — a measure of how many contracts traders hold) is closer to volume on both exchanges. CoinGecko has Report As of March 2023, GMX’s open interest is between $170 million and $200 million for Arbitrum alone. Meanwhile, open interest on dYdX ranges from $330 million to $260 million.

Notably, the volume-to-open interest ratio is higher on dYdX than on GMX. The transaction volume inflation of dYdX may be due to the increased transaction volume of the DYDX token incentive program.Report from IOSG . joint venture notes:

“Where incentives are explicitly aimed at trading activity, as on dYdX, it remains difficult to determine the extent to which trading volume would exist without such incentives.”

On the other hand, the model of targeting traders with Liquidity Providers (LPs) among GLP holders facilitates non-slip trading. Incentivizing liquidity through GMX leads to a natural increase in the trading volume of the token.

According to DefiLlama, GMX leads dYdX by 1.7x in terms of total value locked, with GMX sending $627 million compared to dYdX’s $356 million.

Comparing volume, open interest and liquidity, there is no clear winner between the two. Hence, both are vying for the top spot in decentralized derivatives trading.

Improvements to dYdX and GMX

Both exchanges have their pros and cons, and updates are planned this year to improve their product lines.

Due to significant transaction incentives, dYdX saw a massive $750 million discrepancy between fees earned and incentives, “suggesting that the project pays more in incentives than it earns from fees,” the IOSG report noted.

However, according to tweet Officially, the dYdX team has taken steps to reduce token inflation over the past 6 months from 5.8 million tokens per month to 2.7 million tokens over the same period.

The dYdX team aims to accumulate “real value” for the DYDX token by directing its layer 1 blockchain transaction and transfer fees to holders. They announced plans to launch an independent Cosmos-based layer 1 chain in 2022.

Recently, the team conducted a successful private testnet launch for the dYdX chain, which is expected to officially launch in September.

While GMX has achieved more organic trading volume than dYdX, it only offers limited trading pairs for 4 cryptocurrencies: Bitcoin, ETH, LINK, and UNI. Meanwhile, dYdX offers trading in 37 cryptocurrencies.

The GMX team is working on adding a synthetic smart contract that will support multiple assets on the perpetual trading platform.

GMX also benefited from the decision to deploy on Arbitrum due to its ample liquidity and ability to integrate with other DeFi platforms. For example, GMX has partnerships with Camelot, Olympus DAO, Umami Finance, and other companies in the Aribtrum ecosystem to increase liquidity and usage.

On the other hand, dYdX’s decision to leave the Ethereum ecosystem and move to a standalone layer-1 blockchain could have beneficial effects on speed and performance. However, it may be adversely affected by liquidity segregation.

Technology Outlook and On-Chain Processes

Since the beginning of 2023, the price of DYDX has increased by 134%, while GMX has increased by 90% year-to-date.

According to Nansen data, since the beginning of 2023, “smart money” wallets have accumulated a large amount of DYDX. The analytics firm flags smart money accounts to identify active and productive traders.

Technically, DYDX faces resistance around the November 2022 high around $2.7. If buyers manage to break above this level, the coin could target a 2022 breakout around $6.96. In the downturn, support is found around $1.77.


DYDX 4-hour trading chart | Source: TradingView

Cryptocurrency analysis firm Lookonchain reported that whales accumulated GMX around March 28, totaling $5 million. Another whale account sold another $4.9 million on April 5, incentivizing buyers, the platform reported.

GMX hit an all-time high of $85.95 in March 2023. With support around the 2022 high around $58.91, the coin could head higher if it breaks $85.


GMX 4-hour price chart | Source: Tradingview

While it is unclear which platforms other than dYdX and GMX will eventually lead the way in decentralized derivatives trading, the planned development of these platforms looks positive. Both the token economics and market structure of their native token are bullish.

  • GMX’s TVL up 43% but price down 20% from ATH
  • Trader Joe’s enters top 5 DEXs after Arbitrum launches V2 platform
  • DYDX Confirms Date to Leave Ethereum and Transfer to Cosmos

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As reported by Cointelegraph

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