Perp DEXs thrive amid liquidation chaos, fees and volume spike

DeFi protocols and perpetual DEXs survived the biggest liquidation events on October 10-11 with flying colors. This time, DeFi benefitted from fees and managed to control its liquidations.

DeFi and perp DEXs performed better following the October 10-11 market shakedown. The DeFi space, including perpetual DEXs, still saw liquidations, but showed it was much more stable compared to the 2022 crash. As Cryptopolitan reported, crypto faced $19B in liquidations, the worst event since the crash of FTX. However, this time around, DeFi showed relatively limited crisis effects.

This time around, DeFi has more reliable collaterals, including those based on tokenized T-bills and more reliable stablecoins. ETH collaterals are at much more conservative price levels, with limited liquidations. Currently, ETH has just under $1B in liquidatable values, starting at $1,548, way below market valuations.

Perp DEXs open interest attempts a recovery

Perpetual DEXs were the most affected, losing over 50% of their open interest on liquidations. Open interest on all perp DEXs was at $25.75B before the crash, later dipping to lows of $13.71B.

Perp DEXs value locked started recovering, bouncing from lows of $13B up to $17B. Despite this, the liquidations hurt the trust in perpetual DEXs, after many traders were liquidated and lost their entire positions. | Source: DeFiLlama.

Within days, open interest recoveded to over $17B in total, where Hyperliquid still held over $8.24B in open interest, based on DeFiLlama data. Hyperliquid itself reported a delayed drop to $6.24B, down from $15B during regular trading times. Perpetual DEXs still carry over $33B in daily volumes, with record activity for the past week. Over $264B were traded during the week of October 6-12, matching the weekly record for DEXs activity.

The perp DEXs liquidations came in the middle of a highly competitive narrative, where old and new perp DEXs attracted peak activity. The crash and on-chain liquidations were especially harmful, as more retail traders attempted to hold leveraged positions, getting exposed to outsized risk.

Top perpetual DEX tokens also took a hit, with weekly losses between 16% and 45% for the leading protocols. HYPE sank to $38.71, as the sector is still attempting a recovery of value locked, open positions, and token valuations.

Lending protocols, DEXs benefit from higher fees

DEX trading saw its biggest weekly activity of over $177B in the week of 6-12 October. The outlier result followed a general trend of DEXs activity expansion.

Uniswap and PancakeSwap remained the biggest activity hubs, with no signs of distress. The recent DEXs activity also coincided with a wave of meme token trading on the Binance ecosystem.

Lending protocols had a bigger shock due to their underlying structure. Total value locked remained at over $83B, with Aave at the lead. However, total amount borrowed fell below $50B for the first time since August, as users avoided the risk of opening loans.

Briefly, the annualized yield of Lido’s stETH jumped to 7.05%, later returning to its usual range. Overall, DeFi lending decreased its outsized yields during previous market downturns, offering more conservative earnings for a lower risk of liquidations.