In the highly competitive landscape of on-chain derivative trading, the battle for market share is fierce. Under the influence of incentivization programs, competitors are catching up to and surpassing GMX, leaving the once-leading project in their wake. This article delves into the reasons behind GMX's decline and examines the potential changes in the future of the derivative trading sector.
Title: Unveiling the Secrets Behind GMX's Pursuit by Synthetix and the Phenomenal Surge of dYdX: What Lies Ahead for the Derivatives Trading Space?
The Market Share Competition in the Derivatives Sector: GMX, known for pioneering the Real Yield trend, has long been the go-to project in the on-chain derivative trading sphere. However, GMX's position is no longer as dominant as before, as it has been surpassed by dYdX in terms of trading volume and total revenue over the past few months. Furthermore, other projects previously regarded as "underdogs" have caught up to GMX, resulting in the project losing its foothold.
Figure 1: Monthly Trading Volume Market Share of Perp DEX Platforms in the Last 180 Days. Source: Token Terminal.
The Integration of Perps Projects by Synthetix: Kwenta, the front-end interface integrating with the Synthetix Perps protocol, facilitates smart contract-based trading of synthetic assets. Another Perp DEX on the Optimism network, Polynomial, also utilizes Synthetix's core technology.
In May, Kwenta demonstrated significant growth by doubling its trading volume within a month and frequently surpassing GMX in terms of daily trading volume. Kwenta and Polynomial also experienced periods where their daily active users surpassed GMX. Meanwhile, GMX recorded lower trading volume than Synthetix.
Figure 2: Daily Trading Volume Comparison between Kwenta, Synthetix, and GMX. Source: Token Terminal (data as of May 31, 2023).
So, what factors have contributed to GMX's current decline compared to competitors like dYdX and projects integrated with Synthetix?
Explaining the Rise of Perp DEX Projects: To compete for market share in the derivatives sector, projects primarily employ three key strategies:
Launching trading incentive programs.
Reducing transaction fees on the platform.
Supporting a wide range of assets.
Supporting Multiple Asset Types: Unlike GMX, which mainly focuses on four to five major asset types, projects like dYdX and Synthetix support a broader range of assets. Particularly, Synthetix's Kwenta enables users to trade various types of assets in the crypto market, including gold, AUD, GBP, and more. Trading on these platforms offers users more choices and opportunities.
Reducing Transaction Fees: GMX charges a fixed transaction fee of 0.1%, and additional fees apply for certain activities (staking, asset deposits/withdrawals, etc.), which can raise the transaction fees to 0.2-0.8% of the total collateral. This relatively high transaction fee on GMX gives a competitive advantage to other projects.
In contrast, dYdX has different fee tiers based on users' trading volume. Users with trading volumes below $100,000 or above $50 million per month enjoy significantly reduced or zero fees.
Figure 3: Transaction Fees on dYdX. Source: dYdX.
Synthetix recently adjusted its transaction fees for BTC, ETH, and several other pairs on the platform to 0.02% and a fixed order execution fee of $2 per order. Additionally, Synth