Jack Paul 
The Fragile Nature of Perp DEX Incentives
Stephan Lutz, the CEO of BitMEX, thinks the current excitement around perpetual decentralized exchanges might not last much longer. He shared this view during an interview at Token2049 in Singapore, suggesting that by the time the conference returns next year, platforms like Hyperliquid and Aster might not be dominating headlines anymore.
It’s interesting to watch how quickly things change in this space. Just recently, Aster actually surpassed Hyperliquid in 24-hour trading volume, which shows how competitive things have become. There’s this race happening where new DEXs keep launching, all trying to grab a piece of the growing market. Justin Sun even announced another new DEX at the same conference, adding to the frenzy.
But Lutz seems pretty convinced this excitement won’t last. He described DEXs as having what he calls “inherent pump-and-dump” characteristics. Now, he was quick to clarify that he doesn’t mean this in a negative or scammy way. It’s more about how these platforms operate – they rely heavily on incentives to build momentum, using token rewards and fee rebates to attract users and keep them trading.
The Sustainability Question
“The question is, what sticks?” Lutz asked during our conversation. He pointed out that this boom-and-bust pattern makes it really difficult for DEXs to maintain liquidity over the long haul. For regular traders chasing those high yields, it means exposing themselves to significant volatility and risk.
What struck me was his contrast between the DeFi world and traditional centralized exchanges. He believes that major centralized platforms like Coinbase are actually better positioned to weather these cycles. They’ll likely remain dominant long after the latest DEX incentive programs run their course.
BitMEX itself is trying to bridge both worlds. Lutz acknowledged that DeFi isn’t going away – he personally embraces it as someone who’s been in crypto for a while. But he also noted that institutions simply can’t interact with DeFi in the same way they can with centralized exchanges.
BitMEX’s Strategic Move to Tokyo
Lutz shared some interesting details about BitMEX’s recent infrastructure changes. The exchange moved its data infrastructure from AWS Dublin to AWS Tokyo back in August, and the results have been pretty significant. He said Tokyo, not Hong Kong or Singapore, is where the real trading volume happens these days.
The switch apparently boosted liquidity by about 80% in their main contracts, with some altcoin markets seeing up to 400% improvements. What’s notable is that he attributed these gains not to market-maker intervention, but simply to reducing latency by being physically closer to where the action is.
Looking Ahead to the Next Cycle
Lutz has some thoughts about where crypto might be heading next. He predicts the next cycle will look quite different from previous ones. With more institutional participation coming in, Bitcoin could start behaving more like a “real asset” – meaning we might see less of those dramatic peaks and troughs that characterized earlier cycles.
He expects we’ll see longer plateau phases as adoption grows. The market will still follow similar patterns, but with lower volatility as Bitcoin becomes embraced by more wealthy investors worldwide. We’re already seeing this trend with Bitcoin’s volatility declining since the spot ETFs launched in the US last year.
So while these new DEXs are offering crazy leverage that probably won’t last until next year, the broader Bitcoin market might not see the same kind of fireworks we’ve seen in past cycles. Instead, it could start looking more like any other sophisticated asset class, with gradual movements up and down as the market cycle continues.