A fresh bout of soul-searching has gripped the crypto derivatives industry as leading market participants argue that the market’s structure is fundamentally flawed – not just unlucky.
Wintermute founder and CEO Evgeny Gaevoy set the tone on X, arguing that the core problem is not perpetual futures themselves but the way key venues are architected. Posting under his handle @EvgenyGaevoy (wishful_cynic), he wrote that “the real issue is not the perp design but the centralized (and quadi [sic] decentralized) exchanges that are prime broker, CLOB and custodian all in one,” adding that traditional finance “solved all this stuff long time ago.”
His critique targets the vertically integrated model that dominates both centralized exchanges and some so-called “decentralized” platforms, where custody, matching, risk management and prime brokerage-like functions are bundled into a single entity. In stress events, that consolidation can turn one venue into a systemic choke point.
Structural Weakness Threatens The Crypto Market
DeFiance Capital founder Arthur Cheong (@Arthur_0x) places the blame partly on derivatives product design. He argues that “crypto derivatives (mainly perps) product design and market structure that surround it remain the biggest problem the industry needs to tackle before it can grow to the next level in a sustainable manner.”
He draws a straight line between the March 2020 crash and the recent 10 October (“10/10”) meltdown. In March 2020, he notes, Bitcoin’s 50–70% intraday plunge was exacerbated by BitMEX-style BTC-margined “quanto” perps, “which means BTC perps are collateralized by BTC not stablecoins thus you get the extreme reflexivity on the downside and there’s just very little way you can hedge this quanto perp exposure.”
According to Arthur, most participants recognized this as a design flaw. As stablecoin usage grew, the market share of BTC-margined quanto perps on BitMEX fell from “>80% to less than 20% in one year,” and by mid-2021 “most people are using USDT margined BTC perps.” That collective shift, he argues, “have definitely improve[d] the resilience of market structure significantly” and reduced volatility in BTC, though he still “look[s] forward to a new product design […] significantly better than the current iteration of crypto perps.”
If Gaevoy and Arthur focus on architecture and instruments, pseudonymous trader The White Whale (@TheWhiteWhaleV2) has put the human cost of recent failures front and center in a X post with 1.8 million views.
In the widely shared thread explaining his “personal decision to step away from trading on HyperLiquid,” he praises HyperLiquid founder Jeff Yan and the team for dragging “structural fairness into the spotlight,” but concludes that 10/10 exposed something deeper. “The fact that one centralized exchange can trigger a global liquidation cascade and force temporary price dislocations across every protocol? That’s not a ‘black swan.’ That’s a design flaw.”
His recap of 10/10 is stark: Binance relied on its own oracle, which depegged a stablecoin and started “a smaller, but manageable, liquidation chain.” Then “their API mysteriously went offline.” Market makers who “operate largely delta-neutral” suddenly couldn’t hedge; they pulled quotes across CEXs and DEXs. “With no liquidity present, price falls off a cliff.”
The industry’s reaction, he argues, revealed a misaligned set of priorities. “Victory laps” over “Zero bad debt!” and “Liquidations processed flawlessly!” may show protocols survived, but “Great. The protocol didn’t die. But users did.” He insists that “protecting the protocol IS important – obviously. But it is not the same thing as protecting traders.”
As an alternative, White Whale points to Drift on Solana as one venue that has at least attempted to encode protection at the protocol level. Drift’s liquidation protection, he writes, “isn’t magic. It’s not flawless. But it exists – and more importantly, it worked.” A key rule is simple: “Is the oracle price diverging by more than 50% from the 5-minute TWAP?” If so, the system temporarily halts liquidations, filtering out “scam wicks” and pushing edge cases to the insurance fund.
Across Gaevoy’s structural critique, Yan’s product-design history and White Whale’s exit from HyperLiquid, a common conclusion emerges: today’s crypto market is not just volatile – it is structurally biased against traders in moments of stress. Whether the industry now prioritizes circuit breakers, segregated roles and on-chain protections will determine if 10/10 becomes a turning point, or just another preventable disaster.
At press time, the total crypto market cap fell to $3.09 trillion.
Featured image created with DALL.E, chart from TradingView.com
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