Crypto Market Is Structurally Rigged, Warns Wintermute CEO
A recent bout of soul-searching has gripped the crypto derivatives trade as main market contributors argue that the market’s construction is basically flawed – not simply unfortunate.
Wintermute founder and CEO Evgeny Gaevoy set the tone on X, arguing that the core downside just isn’t perpetual futures themselves however the best way key venues are architected. Posting beneath his deal with @EvgenyGaevoy (wishful_cynic), he wrote that “the true concern just isn’t the perp design however the centralized (and quadi [sic] decentralized) exchanges which might be prime dealer, CLOB and custodian multi functional,” including that conventional finance “solved all these items very long time in the past.”
His critique targets the vertically built-in mannequin that dominates each centralized exchanges and a few so-called “decentralized” platforms, the place custody, matching, threat administration and prime brokerage-like features are bundled right into a single entity. In stress occasions, that consolidation can flip one venue right into a systemic choke level.
Structural Weakness Threatens The Crypto Market
DeFiance Capital founder Arthur Cheong (@Arthur_0x) places the blame partly on derivatives product design. He argues that “crypto derivatives (primarily perps) product design and market construction that encompass it stay the most important downside the trade must deal with earlier than it may well develop to the following stage in a sustainable method.”
He attracts a straight line between the March 2020 crash and the latest 10 October (“10/10”) meltdown. In March 2020, he notes, Bitcoin’s 50–70% intraday plunge was exacerbated by BitMEX-style BTC-margined “quanto” perps, “which implies BTC perps are collateralized by BTC not stablecoins thus you get the acute reflexivity on the draw back and there’s simply little or no approach you may hedge this quanto perp publicity.”
According to Arthur, most contributors acknowledged this as a design flaw. As stablecoin utilization grew, the market share of BTC-margined quanto perps on BitMEX fell from “>80% to lower than 20% in a single yr,” and by mid-2021 “most individuals are utilizing USDT margined BTC perps.” That collective shift, he argues, “have positively enhance[d] the resilience of market construction considerably” and decreased volatility in BTC, although he nonetheless “look[s] ahead to a brand new product design […] considerably higher than the present iteration of crypto perps.”
If Gaevoy and Arthur deal with structure and devices, pseudonymous dealer The White Whale (@TheWhiteWhaleV2) has put the human price of latest failures entrance and middle in a X submit with 1.8 million views.
In the broadly shared thread explaining his “private choice to step away from buying and selling on HyperLiquid,” he praises HyperLiquid founder Jeff Yan and the staff for dragging “structural equity into the highlight,” however concludes that 10/10 uncovered one thing deeper. “The proven fact that one centralized trade can set off a worldwide liquidation cascade and drive short-term worth dislocations throughout each protocol? That’s not a ‘black swan.’ That’s a design flaw.”
His recap of 10/10 is stark: Binance relied on its own oracle, which depegged a stablecoin and began “a smaller, however manageable, liquidation chain.” Then “their API mysteriously went offline.” Market makers who “function largely delta-neutral” abruptly couldn’t hedge; they pulled quotes throughout CEXs and DEXs. “With no liquidity current, worth falls off a cliff.”
The trade’s response, he argues, revealed a misaligned set of priorities. “Victory laps” over “Zero unhealthy debt!” and “Liquidations processed flawlessly!” could present protocols survived, however “Great. The protocol didn’t die. But customers did.” He insists that “defending the protocol IS necessary – clearly. But it isn’t the identical factor as defending merchants.”
As an alternate, White Whale factors to Drift on Solana as one venue that has no less than tried to encode safety on the protocol stage. Drift’s liquidation safety, he writes, “isn’t magic. It’s not flawless. But it exists – and extra importantly, it labored.” A key rule is straightforward: “Is the oracle worth diverging by greater than 50% from the 5-minute TWAP?” If so, the system briefly halts liquidations, filtering out “rip-off wicks” and pushing edge instances to the insurance coverage fund.
Across Gaevoy’s structural critique, Yan’s product-design historical past and White Whale’s exit from HyperLiquid, a typical conclusion emerges: as we speak’s crypto market is not only unstable – it’s structurally biased towards merchants in moments of stress. Whether the trade now prioritizes circuit breakers, segregated roles and on-chain protections will decide if 10/10 turns into a turning level, or simply one other preventable catastrophe.
At press time, the overall crypto market cap fell to $3.09 trillion.
