BitMEX CEO: DEX Craze Can Quickly End

BitMEX CEO Stephan Lutz predicts that platforms like Hyperliquid and Aster may lose their market-leading position in the future decentralized exchange (DEX) world. Lutz stated that these platforms' incentive-driven business models have weak resilience.

There is fierce competition in the perpetual decentralized exchange (perp DEX) space. New platforms are putting pressure on former leaders to gain market share. For example, last week, Aster surpassed Hyperliquid in 24-hour trading volume. This situation accelerated competition, paving the way for the launch of new DEXs.

Justin Sun announced the launch of a new DEX at the Token2049 conference in Singapore, signaling further intensification in this rapidly changing environment. However, Lutz emphasized that this excitement would be short-lived, characterizing DEXs as inherently a 'pump-and-dump' scheme. Lutz said, "DEXs are built on providing access to permissionless markets. They build momentum based on incentives; this is fundamentally a 'pump-and-dump' scheme."

Lutz likened incentive programs to advertisements designed to attract attention, stating that these platforms lure users with token rewards and fee discounts, then continue to drive trading based on this feedback loop. "The problem is, what is permanent?" he asked, adding that this volatility makes it difficult for DEXs to retain liquidity in the long term. He also noted that ordinary investors face significant volatility and risk while chasing high returns.

Lutz stated that in the centralized exchange market, major players like leading Coinbase are in a better position to successfully navigate these cycles. BitMEX's goal is to bring together the centralized and decentralized worlds. While Lutz is personally deeply involved with decentralized finance (DeFi), he stressed that institutional investors cannot interact with DeFi in the same way they can interact with centralized exchanges.

Regarding BitMEX's move to Tokyo, Lutz stated that Japan offers a fertile ground for decentralized exchanges. BitMEX moved its data infrastructure to AWS Tokyo in August of this year. The purpose of this change was to increase liquidity. Lutz noted that the results offered by this change met expectations. He concluded that being based in Tokyo increased liquidity by 80% and in some altcoin markets by up to 400%.

Predicting the future crypto cycle, Lutz stated that this cycle would be significantly different from previous bull and bear markets. He noted that with more institutional participation, assets like Bitcoin (BTC) could behave like real assets, predicting a decrease in the dramatic fluctuations observed in previous cycles. "With more adoption, we will see longer plateau phases than past cycles; the market will still follow the same rules and characteristics, but with adoption by wealthy individuals worldwide, we will encounter lower volatility," he said.

Recently, it was also noted that Bitcoin market volatility has significantly decreased since the introduction of spot ETFs in the US. All these data suggest that the high-leverage trading offered by some new DEXs is not sustainable for the coming year, according to Lutz. Instead, Bitcoin is expected to show gradual increases and decreases, like other developed asset classes, as the market cycle continues.