The decentralized derivatives exchange (DEX) landscape is undergoing a dramatic shift. Once dominated by established players like GMX, the market is now seeing aggressive challenges from emerging platforms such as Kwenta and Level. In a shrinking market marked by declining overall trading volumes, these protocols are leveraging strategic incentives, lower fees, and improved user economics to capture market share — and they’re succeeding.
Recent data reveals a pivotal change: Kwenta and Level have surpassed GMX in weekly trading volume, signaling a potential turning point in the competitive dynamics of on-chain perpetual futures trading.
Market Trends: A Shrinking Pie with Shifting Shares
Since late March, total trading volume across major derivative DEXs has trended downward. Out of six leading protocols, five have experienced declining activity — all except Kwenta, which has defied the trend with consistent growth.
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While dYdX still commands nearly half of the entire market due to its orderbook model and sustained reward programs, the battle within the pool-based perpetual DEX segment has intensified. Kwenta and Level are now outpacing GMX, once the undisputed leader in this category.
GMX’s peak came in mid-April, after which its volume steadily declined to levels comparable to late 2022. Meanwhile, Kwenta’s volume surged starting in February following the launch of trading incentives and further accelerated in May with the introduction of OP token rewards.
Why Kwenta Is Winning: Incentives and Cost Efficiency
Kwenta, a perpetual trading frontend built on Synthetix, now accounts for over 95% of Synthetix’s trading volume and revenue growth. With Synthetix securing more than $400 million in TVL to back its liquidity pools, Kwenta benefits from deep, reliable liquidity — a critical factor for traders.
Two key drivers explain Kwenta’s rise:
1. Aggressive Incentive Programs
Starting April 26, Kwenta began distributing 130,000 OP tokens per week. From May 10 to August 30, that amount increased to 330,000 OP weekly — approximately $500,000 in value at current prices. These ecosystem-aligned incentives draw traders without overburdening the protocol’s own token supply.
Unlike pure protocol-token rewards, OP incentives reduce immediate sell pressure on Kwenta’s native economy, making the model more sustainable in the short to medium term.
2. Lower Trading Fees
Kwenta charges 0.02% to 0.06% in trading fees, depending on maker/taker roles. In contrast, GMX charges a flat 0.1% trading fee, plus additional borrowing costs based on position duration. For active traders, especially those avoiding wash trading, Kwenta offers a significantly cheaper entry point.
This cost advantage, combined with strong incentives, makes Kwenta particularly attractive during bearish or stagnant market conditions when yield sensitivity increases.
Level Finance: High Volume, High Concentration
Level Finance has also seen explosive growth, peaking at $2 billion in weekly volume in mid-April. Although volumes dipped afterward, a notable rebound occurred the week of May 22.
Level employs a dual-incentive structure:
- Loyalty Rewards (lyLVL): Users earn 1 lyLVL per dollar paid in fees. Daily rewards of 10,000 LVL are distributed proportionally based on lyLVL holdings.
- Ladder Rewards: When daily protocol revenue exceeds $100,000, extra LVL tokens are allocated weekly to the top 20 traders. Ranking is determined by fee contributions multiplied by a “boost” factor from staked LVL.
However, this system skews heavily toward whales. Data shows:
- The top 5 traders account for nearly 75% of total volume
- Average user count remains below 600
- Total position size is only around $2.6 million
This suggests a high degree of volume inflation, likely driven by incentivized power users rather than organic adoption.
Real Usage vs. Incentivized Volume: Who’s Really Trading?
With generous rewards fueling activity, it’s crucial to assess actual user engagement:
| Metric | GMX | Kwenta | Level |
|---|---|---|---|
| Unique Traders (30d) | ~12,000 | ~2,986 | <600 |
| Avg Trade Size | ~$400k | ~$1.6M | ~$5.76M |
| Top 5 Share of Volume | <20% | ~33% | ~75% |
| Total Positions | ~$180M | ~$50M | ~$2.6M |
GMX remains the leader in real user base and open interest, with broad participation and lower concentration. Kwenta shows healthier distribution than Level, with moderate centralization and growing genuine activity.
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Level’s extreme concentration raises concerns about sustainability once incentives taper off.
Upcoming Developments: What’s Next for Each Protocol?
GMX V2: Smarter Pools, Better Risk Control
GMX is preparing for V2 launch (currently in testnet), introducing major upgrades:
- Isolated liquidity pools per trading pair instead of a single GLP pool
- Support for both native asset-backed pairs (BTC/ETH) and USDC-backed synthetic pairs
- Introduction of funding rate adjustments and price impact controls to balance long/short exposure
While this improves risk management and enables risk-tiered assets, it also increases complexity for liquidity providers who must now evaluate multiple pools.
Kwenta & Synthetix: Aligning Ecosystem Incentives
Kwenta’s future is tied to Synthetix’s evolution. Founder Kain Warwick recently proposed several transformative changes:
- Allocate 5–10 million SNX for trading incentives
- Introduce passive staking, simplifying participation compared to the current performance-based model
- Use treasury funds (e.g., 10 million SNX) to subsidize frontends, giving projects like Kwenta a direct revenue stream (3–5% base yield)
These moves could dramatically improve alignment across users, LPs, and builders — potentially setting a new standard for modular DeFi ecosystems.
Level’s Move to Arbitrum: Chasing Liquidity
In May, Level passed a governance vote to expand onto Arbitrum, where it has already deployed LVL liquidity pools. Full trading functionality is expected by mid-June.
Given Arbitrum’s robust user base and capital depth, this cross-chain expansion could inject fresh organic volume — if Level can attract non-incentive-driven traders.
Frequently Asked Questions
Q: Why is Kwenta growing while other DEXs decline?
A: Kwenta combines low fees (0.02–0.06%) with substantial OP token incentives ($500K/week), making it cost-effective for real traders amid broader market downturns.
Q: Is GMX losing relevance?
A: Not yet. GMX maintains the largest real user base and deepest liquidity. However, without strategic updates or renewed incentives, it risks ceding ground to more agile competitors.
Q: Are Kwenta and Level’s volumes mostly fake?
A: Kwenta shows solid organic growth with moderate concentration. Level’s volume is highly centralized — likely inflated by a small group optimizing rewards.
Q: How do Synthetix’s upgrades benefit Kwenta?
A: New passive staking and frontend subsidies would lower entry barriers for users and increase revenue stability for Kwenta, strengthening its long-term viability.
Q: Can Level sustain its model?
A: Unlikely unless it reduces reliance on high-inflation LVL rewards and attracts broader user participation beyond top traders.
Q: What role does dYdX play in this competition?
A: dYdX remains dominant via its orderbook model and strong incentives (~$3M/week in DYDX rewards), but faces scrutiny over token unlocks and awaits its v4 chain launch.
Final Outlook
The derivative DEX race is far from over. While GMX still leads in real usage and trust, Kwenta has emerged as a serious contender through smart incentive design and tight integration with Synthetix’s robust infrastructure. Level shows what’s possible with aggressive gamification — but also highlights the risks of over-reliance on concentrated, incentive-driven volume.
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As protocols refine their economic models and expand cross-chain, the focus will shift from raw volume to sustainable user retention, fee efficiency, and true decentralization. The winner won’t just be the one with the highest numbers — but the one that best balances growth with long-term health.