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How DeFi DEX Derivatives Could Explode in 2023

2 mins
Updated by Kyle Baird
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In Brief

  • DeFi and DEX derivatives will keep growing.
  • New players offering derivatives are emerging.
  • DeFi TVL is up 29% so far this year.
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New crypto narratives are emerging this year and decentralized finance (DeFi) derivatives are among them. The growth of previous years is likely to continue into 2023.

DeFi derivatives have had an explosive entrance into the crypto ecosystem. Despite the 2022 bear market, leading players have performed well.

Derivatives refer to investment vehicles such as futures, options, swaps, and other financial contracts which track or provide exposure to crypto assets.

Traditionally, derivatives trading has only been available to institutional traders. However, DeFi and DEXes have opened the digital doors for everyone to have a dabble.

On Jan. 30, DeFi analyst “ViktorDefi” shared his insights into the next “crypto gold rush.”

Another 2023 Crypto Narrative

Crypto derivatives have been steadily growing ever since the last bull market, but the analyst noted:

“However, recently users are gravitating towards DEX derivatives obviously due to fall of FTX & the need for self-custodian practices.”

Furthermore, DEX derivatives offer a number of advantages over their centralized counterparts. These include real yields, hedging against the market, organic growth, and capital efficiency.

Some of the top players in this niche sector have performed very well. These include dYdX, GMX, Gains Network, and Perpetual Protocol, among others.  

Additionally, there are a number of emerging players that could do well in 2023 as identified by the researcher. These include the Vela Exchange, which recently opened public beta registration, and Polygon-based Perp88, a DEX offering big leverage and zero fee swaps.

El Dorado Exchange, Y2K Finance, NFT Perp, Logium, and Vest Exchange were also mentioned as ones to look out for.

As DeFi makes a comeback, traders and ‘degens’ alike will be seeking higher yields from more exotic products such as derivatives.

DeFi TVL Hits 2023 High

DeFi total value locked has gained 29% since the beginning of 2023, according to DeFiLlama. As a result, TVL hit its highest level since early November of $57.3 billion on Jan. 30. However, it has dipped back to around $55.4 billion today with the wider market pullback.

Current TVL levels are back to what they were in March 2021 as the bull market was gathering pace. They are almost 600% higher than levels this time three years ago.

DeFi TVL 3 months - DeFiLlama
DeFi TVL 3 months – DeFiLlama

The Lido liquid staking platform has the largest market share with 14.5% and $8 billion in collateral locked. DeFi pioneer MakerDAO is a close second with a TVL of just over $7 billion and stablecoin DEX Curve is the third largest protocol.

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Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...