Perps came to crypto via CEX, introduced by BitMEX. But the Perps Landscape has since expanded into the decntralized, onchain realm, and these projects are more popular than ever.
Perps are a financial derivative contract that allows traders to speculate on the future price movement of an underlying asset. There are certain difficulties that make it difficult to price options in crypto, and as a result, Perps have emerged as, and have been able to maintain their spot as the primary crypto derivative. There is no shortage of Perps projects across a variety of chains; in today’s edition, we’ll be focusing on IntentX, Vertex, Contango, and Infinity Pools…
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Primer on Perps & Performance
Perps have some inherent advantages when it comes to taking a position on an asset:
Continuous Trading: Perps do not have an expiration date and they are designed to be traded indefinitely.
Price Tracking: The price of a perp closely tracks the spot price of the underlying asset.
Funding Rate: To keep the futures price aligned with the spot price (price tracking), a funding rate is periodically exchanged between long and short traders.
If the futures price is higher than the spot price, long traders pay short traders.
If the futures price is lower than the spot price, short traders pay long traders.
This encourages convergence between the two prices.
Leverage: Traders can use leverage, which means they can control a larger position with a smaller amount of capital.
Risk Management: Perps often require traders to maintain a minimum margin level. If a trader’s margin balance falls below this level due to losses, their position may be liquidated.
Trading Strategies: Traders use perps for various strategies, including hedging, speculation, and arbitrage.
In December, the total marketcap of perps project tokens was $1.45B. The top 5 perps projects make up a whopping ~$1.32B of this figure.
IntentX
IntentX is a decentralized OTC DEX. Specifically, it serves as a front end of SYMMIO’s intent-based derivatives infrastructure, with IntentX focusing on providing perps. The platform offers a wide variety of coins, over 250 trading pairs, based on what is available on Binance.
Intents based protocols, like SYMMIO and its frontends, Paraswap, or 1inch allow for traders to request quotes from pro market-makers offchain. IntentX aims to help incentivize market makers via the ability to proactively hedge onchain positions offchain. Delta neutral trades and appreciable yield are other factors market makers may appreciate.
The platform is currently running a point program for the native $INTX token, incentivizing traders with ~1 point per $100 USD notional volume traded. There are also bonuses for consecutive days in which trades are opened or closed.
Contango
In the perps space, Contango operates in a unique manner, the first of its kind; rather than using an orderbook, or an AMM/ pool-based DEX, the project utilizes lending markets for trading. It achieves its perps/ leverage trading capabilities from looping, the process of depositing assets on lending markets, borrowing against them, depositing the borrowed funds, borrowing more, etc. Flashloans are used to automate this processThis solution is dubbed ‘cPerps’ (Contango Perps).
In futures or perpetuals markets, ‘Contango’ refers to the future price being higher than the current spot price of an asset or token, while ‘backwardation’ refers to the opposite when the implied futures price is lower than the current spot value.
Contango’s unique architecture means it doesn’t actually hold any TVL, since it simply uses available liquidity on top lending markets like Aave. It also allows the protocol to avoid direct Oracle manipulation, since it depends on the frontend. This is also the source of its limitations, as it can only offer perps that have pre-existing onchain markets. Trading is also susceptible to any issues with the underlying pool on the lending market, which might include liquidations due to oracle problems.
Users can access a growing number of tradable assets, with a growing number of underlying lending markets available for each, across different chains. Attractive features of Contango include attractive APYs which come from the difference between lending market borrow rates and lend rates. The project has launched its point system and subsequent token launch plans. Other plans include improving trading UIs and introducing delta-neutral strategies.
Infinity Pools
Infinity Pools is a little different from the other protocols above, as it isn’t technically just a perps provider, perse. It functions as a decentralized exchange with inherent perps capabilities. The exchange can offer unlimited leverage on any asset without the risks associated with liquidations, oracles, or counter-parties.
One unique aspect of Infinity Pools is that it allows for theoretically infinite leverage. The Infinity Pools model uses AMMs for liquidity, as opposed to an orderbook model which wouldn’t suffice as market makers would be reluctant to accept such narrow spreads.
Infinity Pools aims to launch its mainnet soon, following an audit on March 1st. The exchange will eventually launch on an L2.
Announcement *
We’re hosting our 2nd episode of Revelo RoundTable at 12PM EST Thursday.
Last week we covered perps; in this twitter space, we set our sights on Options, featuring Cega, Premia, Dopex, Panoptic, & rysk.
Vertex
Vertex opted to go the orderbook route, as opposed to providing its perps on top of a pool-based DEX. The primary reason behind this choice is scalability, which is a priority for the protocol, as well as capital efficiency.
Vertex is interested in capturing the interest of institutions, and potentially bringing them away from CEXs. User onboarding processes and user-friendly APIs help to fuel these efforts, simplifying integration.
On the security side of things, Vertex has employed certain economic strategies, in addition to it’s code audits, to help mitigate and prevent potential exploits and attacks.
Last year, Vertex wrapped up their ARB trading incentives program which offered up to 3M ARB for trading or participating in the protocol’s elixir pools. The Vertex token ($VRTX), which launched in late November, currently sits at a ~ $46M marketcap and a $250B FDV.
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