SINGAPORE – By the time Token 2049 reunites next year, decentralized exchanges like polymeric meat and aster that grab today’s headlines may no longer be dominant, Bitmex CEO Stephan Lutz told Coindesk in an interview, warning that their incentives are too vulnerable to the business models that are useful.
Recently, a competitive battle has erupted in the Perp Dex sector, along with emerging platforms like Aster and Lighter, as well as emerging platforms that challenge previous priorities.
Last week, Aster surpassed high lipids in terms of 24-hour trading volume. This has sparked competition among competitors to launch a new DEXS, aiming to gain market share in this growing sector.
In this context, Justin San announced the launch of a new Dex at the Token2049 conference in Singapore, indicating further strengthening of this rapidly evolving landscape.
However, according to Lutz, who called Dexs a unique pump-and-dump scheme, the excitement is likely to be short-lived.
“Dexs is about providing access to a market that doesn’t have intermediaries and gaining momentum by relying heavily on incentives. It’s basically a unique pump and dump scheme,” says Lutz. “I don’t mean it’s not a bad way or a scam. It’s all public. I know what you’re into.”
He likened incentive programs to attention-seeking ad blitz, explaining that these platforms hook users with token rewards and fee rebates and continue to trade people on that feedback loop.
“The question is, what’s stuck?” he continued.
This boom and bust cadence not only makes DEX difficult to maintain liquidity over the long term, but also means retailers chasing large yields are exposed to considerable volatility and risk.
In contrast to the churn he saw in defi, Lutz said the biggest centralised exchange led by Coinbase and its peers is well positioned as going through these cycles and remaining dominant even after the latest index incentives sink.
He said that Bitmex’s goal is to span both worlds and that Defi is enduring and personally accepts it as a native of encryption, but that institutions cannot interact with it the same way as central exchanges.
Bitmex’s Tokyo Pivot
According to Lutz, Japan’s capital, not Hong Kong or Singapore, is the place where trading volumes are available.
In August, the exchange officially moved its data infrastructure from AWS Dublin to AWS Tokyo. The Switch has highlighted the appeal of Japan and achieved the desired results.
“We used to be in Ireland, but it’s getting more and more difficult because basically everyone except US players are in Tokyo data center,” he said.
He said the switch has improved liquidity by around 80% on Bitmex’s major contracts and up to 400% in some Altcoin markets, and that is due to the fact that being in Tokyo would reduce delays, rather than market makers intervention.
Heading towards the next cipher cycle
Lutz predicts that the next cipher cycle will appear to be significantly different from previous booms and busts.
He said that with more institutional participation, the BTC can act like a “real asset” and smooth out the dramatic peaks and troughs that defined past runs.
“We expect to see a longer plateau phase as we see larger adoptions than in previous cycles. The market still follows the same rules and characteristics, but it will have lower volatility as it becomes a real asset that is accepted by the wealthy people around the world,” he said.
The volatility in the Bitcoin market has declined significantly since the debut of Spot ETF in the US last year. Furthermore, BTC’s implicit volatility index has steadily evolved into a Vix-like structure, moving in the opposite direction of spot prices.
All this means that, despite some of these new DEXs offering eye-opening leverage, Lutz believes it will last until next year, but BTC doesn’t have any fireworks in store. Instead, it looks like other refined asset classes that have gradually rises and falls as the market cycle continues.