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ON–239: Derivatives

From ournetwork

Sector Overview, Lyra, Drift, Contango & Cryptex.

👥 Anthony Loya | Dashboard

📈 In early 2024, derivatives trading volumes peaked at $15B on DEXs and $565B on CEXs.

  • On centralized exchanges (CEXs), perpetual contracts (perps) are dominating the crypto derivatives landscape, as futures fade — daily volume for perps on CEXs is consistently over $100B while futures volume has dropped below $1B, according to data from CoinCarp. Binance is the leading venue for both perps and futures. On the perps side Binance regularly contributes nearly half of total volume, with other players like OKX, Bybit, and Bitget also routinely posting $25B+ volume days.

Source: Dune Analytics - @sashimiboi & @sashimiboi via CoinCarp

  • There's been strong growth in DEX derivatives trading volumes this month. According to DeFiLlama, the start of 2024 saw a dramatic increase in trading activity, with volumes reaching as high as $20B at its peak. This surge hasn't entirely faded, with daily trading volume averaging around $7.86B. The chart illustrates a clear upward trend, particularly from mid-2023, indicating growing participation in decentralized finance as well as an explosion of venues to trade.

Source: Dune Analytics - @sashimiboi

  • Three DEXs have emerged as frontrunners in total value locked (TVL) and derivatives trading volume: GMX ($542.3M TVL), dYdX ($484.6M TVL), and Jupiter ($411.33m TVL). Collectively, these titans have facilitated a staggering $1.56T in derivatives trades. GMX's primary chain is Arbitrum, with the projects V1 and V2 combining for over $157B in volume. GMX's Avalanche deployment accounts for another $20.9B in volume. For dYdX V3, Ethereum remains the project's primary chain having processed $1.21T in volume. The dYdX chain (V4) is gaining ground however with $133.6B in volume. Jupiter only exists on Solana is the sole focus, with $50.7B in volume.
  • 💦🔬 Tx-Level Alpha: On May 21, 2024, a major transaction worth $6,582,881.74 occurred, marking a significant activity in the derivatives market. This transaction involved a long position in WETH, signaling a bullish sentiment.

① Lyra 🟢

👥 Paul | Website | Dashboard

📈 Lyra weekly volume reaches all time high of $230M+

  • Lyra reached ATHs in volumes, trades and fees last week, with $232M traded across perps and options and $142k in trading fees collected. During the ETH ETF news, Lyra reached $97M in daily volume, over 10k daily trades and $90M in open interest. About 60% of the volume came from perps, which is often naturally generated by MMs and traders hedging the delta of their volatility bets.

Source: lyra.finance/stats

  • Unique depositors into Lyra Chain surpassed 1,500 with the launch of the new Vault product. These vaults allow users to benefit from income-generating options strategies without having to manage the trades themselves, opening up options to a wider audience.

Source: Dune Analytics - @Muir

  • Lyra Chain is now the second largest consumer of Celestia block space. Lyra requires a large amount of data throughput due to its non-custodial nature, as every transaction is settled on chain. Celestia helps keep Lyra's transactions cheap by reducing the cost of storing all the transaction data.

Source: Blockworks Research

  • 💦🔬 Tx-Level Alpha: In this transaction roughly ~$15M was settled atomically as a trader opened a box spread. Box spreads on Lyra allow traders to make leveraged arbitrage plays on the floating vs fixed interest rates offered within Lyra. This trade used $.05 of gas fees, instead of the ~$140 it would have cost on Ethereum, but the end user didn't even have to pay that since all transactions are gasless/sponsored on the Lyra exchange.

② Drift ⚡️

👥 Martin | Website | Dashboard

📈 Drift hits $370M in TVL, ~$28B in cumulative volume and over $8.4M in annualized revenue

  • Drift is the leading perpetual DEX on Solana, aiming to be the go-to platform for traders to trade any asset using any collateral. The broader Drift ecosystem serves as an open financial layer where builders can build on top of Drift. It's been an action-packed quarter for Drift, with the launch of their token and rapid growth in various metrics. Since the start of the year, Drift's TVL has grown 3.2x to $370M, hitting new all-time highs.

Source: DeFi Llama

  • Beyond TVL growth, Drift has facilitated almost $28B in trading volume, across $18.1M trades for 191.7K traders. Weekly trading volume consistently crosses $500M with 10-15K weekly traders.

Source: app.drift.trade

  • A lesser-known metric is Drift's revenue numbers. As of writing, Drift is generating over $11.7M in annualized fees and $8.4M in annualized revenue based on the last 30 days. This makes it one of the highest revenue generating DEXs on Solana.

Source: Dune Analytics - @bigz & @crankyhog

  • 💦🔬 Tx-Level Alpha: The Drift account BxTE is one of the best perp traders of Drift Protocol's user base, with a current settled PNL of almost $1M. The user is currently shorting Solana and has a liquidation level of $600.

③ Contango 💃🏾

👥 Mitch | Website | Dashboard

📈 Contango has $100M in open interest - but most of it on correlated assets.

  • Traders on Contango have shown what they like the most: looping on correlated assets, rather than directional trading. Currently, the highest OI is on sUSDe/DAI ($26M). Ethena's yield-bearing sUSDe has recently been made available on Morpho with various LTVs, so users started looping it against DAI via Contango, as yields are often in the double-digit zone. Other instrument with high OI are: wstETH/ETH ($22M) and weETH/ETH ($19M), signaling a strong interest for yield-bearing correlated loops.

Source: app.contango.xyz

  • The 4th highest OI is on PTeETH/ETH ($6.6M). PT instruments have a fixed lending leg (PTs from Pendle) and a variable borrowing leg (ETH). Their popularity is due to the fact that -if rates don't move- users can lock in a fixed yield at maturity. PTs can be looped on Contango via Silo or Dolomite.

Source: Dune Analytics - @contango_xyz

  • Whales still love directional trading on Contango (see below) as they can long at low leverage with the lowest and least volatile funding rate in crypto. This is supported by academic research that compares perps with "loan positions”. Directional trading represents around 30% of volumes on Contango.

Source: app.contango.xyz

  • 💦🔬 Tx-Level Alpha: Whales like this one still use Contango for directional trading: he opened a wstETH/USDC trade in March, kept DCAing into it at low leverage, up until 50 wstETH, and only paid around $950 in funding (annualised funding is just 1%🤯). His current net PnL is $36,563, plus some extra $1,288 from Moonwell rewards he got just for trading on that market.

④ Cryptex 👾

👥 Anthony Loya | Website | Dashboard

📈 Cryptex π reaches $8.5M+ in trading volume and recovers to ~$9.6M in available liquidity

  • Cryptex Finance is a DeFi protocol that makes crypto native markets tradable. Available liquidity took a dip in mid-May but is recovering as we enter June. Long available liquidity $4.81M and short available liquidity is $4.78M. There's also been a key development — Pi, Cryptex's latest version, could not support prices which were less than $0.00001 but these fees are now supported with a decimal transformation.
  • The total trading volume on Cryptex has surged to a noteworthy $8.6M, showcasing a thriving marketplace. This isn't just about a single asset – the recent upgrades to Cryptex π have unlocked the ability to trade a wider range of cryptocurrencies and perpetual contracts. TCAP, the total crypto market cap index product, remains a standout with its own impressive trading volume. This strong engagement suggests users are actively leveraging Cryptex for various investment strategies.

Source: Dune Analytics - @sashimiboi

  • Cryptex's maker and taker volume reveals a fascinating trend. Maker volume consistently surpasses taker volume but over the last 3 months taker volume & fees has flipped maker volume & fees. Indicating a market brimming with liquidity providers.

Source: Dune Analytics - @sashimiboi

  • 💦🔬 Tx-Level Alpha: A really interesting transaction was recently executed who opened a $173,049.80 liquidity provider position in early June 2024, hinting at a shift in market sentiment. The maker fee generated on this trade was $367.73.  This move reflected a recent trend of traders opening liquidity provider positions, signaling confidence leading into a June recovery. 
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