GMX launched in early September 2021 as a decentralized perpetual exchange offering swaps and leverage trading and it made a big splash in the DeFi community.

If you haven’t heard about GMX, let’s get you up to speed: GMX’s launch on Arbitrum was seen as a major DeFi milestone. Aside from proving Arbitrum as an effective Ethereum L2 scaling solution, GMX stood out for two big reasons:

1. The first DEX and perpetual market to launch on the Arbitrum ecosystem.

2. A shared liquidity pool system minimizes price impact on trades of all sizes without affecting the market price.

Within a month of launch, GMX grew its TVL to over $30 million, averaging ~$1.4 million in daily trades. GMX has evolved into a liquidity mining program, an NFT marketplace, and a yield farming platform. Its ongoing growth puts it at TVL of over $450 million and boasts a 24-hour trading volume of $1 million at the time of writing.

GMX’s growth and adoption also accrued value to the GMX token. The GMX token market price on Sept 13th of 2021 was $14.74. One month later, it was $22.33. A year later, it is $46.27, and at the time of writing, it sits at $36.66 — a more than 200% price appreciation since launch.

Looking back, it’s safe to say that GMX’s launch on Arbitrum was a great success. Demand for a decentralized perpetual market on Arbitrum was and still is – high.

But why did a perpetual market and shared liquidity pool system impact Arbitrum’s growth? And what does this have to do with Kinetix and Kava Chain?

Perpetual Propulsion

The evolution of DEXs and derivatives markets (like perpetual swaps) in crypto presents builders with novel tools to push DeFi forward and provide users with incentives for early adoption.

Kinetix Finance, a state-of-the-art v3 perpetual DEX, brings the same potential to Kava Chain that GMX brought to Arbitrum. The flywheel effect works like this: the launch of the first DEX and perpetual market protocol on an ecosystem creates positive market sentiment, which accelerates liquidity growth and user activity on the protocol and, by extension, its ecosystem.

GMX offered Arbitrum users the flexibility of perpetual swaps without an expiry, so it drew a larger pool of seasoned and novice traders into the ecosystem, contributing to more liquidity and activity.

This led to a surge in the TVL, reflecting a heightened capital allocation within the Arbitrum ecosystem. The non-expiring nature of GMX’s perpetual contracts stimulated higher trading volumes among these new users, who could adjust their positions without being bound by contract end dates.

This heightened activity enhanced the overall liquidity of Arbitrum and incentivized more people to onboard and participate in the Arbitrum ecosystem.

So why is Kinetix Finance ripe to experience the very same flywheel effect?

The Kinetix v3 DEX & Perpetual Market

The Kinetix team is building from their past successful experience with Quickswap, the largest DEX on Polygon for over 3 years, which at its peak had ~1.5 billion in TVL and ~1 billion in 24h trading volume.

A new report by the Network Contagion Research Institute (NCRI) suggests that social media activity, especially from inauthentic accounts, may have significantly amplified the value of certain cryptocurrencies listed on the now-defunct FTX exchange.

Digital asset investment products experienced a significant outflow of funds this week, totaling $55 million, according to the weekly report by CoinShares.

Analysts, including James Butterfill, believe the market’s reaction is due to the disappointment from recent media reports indicating a delay by the US Securities & Exchange Commission in approving a US spot-based ETF.

Bitcoin, the leading digital asset, reversed the previous week’s inflows, recording outflows of $42 million. At the same time, short-Bitcoin positions saw outflows for nearly the 17th week in a row, except for minor inflows totaling $2k. Ethereum followed the Bitcoin trend, experiencing $9 million worth of outflows.

Altcoins were not spared from this sell-off, with Polygon, Litecoin, and Polkadot seeing respective outflows of $0.9 million, $0.6 million, and $0.5 million. The outflows were broad across product providers but primarily focused on Canada and Germany, which experienced US$35.9 million and $11 million in outflows, respectively.

Switzerland and Australia, however, reported minor inflows totaling $3.5 million and $0.1 million, respectively.

The figures take month-to-date outflows to $110 million for August. However, year-to-date numbers show $345 million in inflows.

Friend Tech (FT), the web3 social token platform that saw a resurgence in user activity recently, has seen an increase in “sniper bots,” which have been causing significant shifts in share prices.

According to a detailed analysis performed by  X user @unexployed_ of Castle Capital, these bots, beyond their normally expected functionality, are deploying a technique of ‘sniping’ to gain control over high-value profile shares.

In the case of DappRadar’s recent registration on FT, Unexployed revealed that the share prices started at an unusually high point of 0.26 ETH. This was not triggered by a registered account but seemingly by a sniping address interacting directly with the smart contracts, demonstrating the influence of these bots on the market.

Digging deeper into basescan.org, Unexployed was able to trace the chronological order of buyers and sellers. Within the first four blocks, there were already 65 shares on the market. And DappRadar was not alone. Other entities, such as Moonshilla and Rektdiomedes, also faced a similar situation where snipers gained immediate control over their FT supply.

The primary sniper, identified as 0x081…951, executed over 20,000 transactions to acquire the shares. The first 46 transactions failed with the error “Fail with error ‘Insufficient payment” and were reverted, according to Basescan.

A CryptoSlate analysis of the transactions revealed that the account attempted to purchase the shares before the owner of the account had purchased the first share (a requirement of FT.) The transaction log states Fail with the error, “Only the shares’; subject can buy the first share”