Crypto Derivatives Platform dYdX Raises $65M in Paradigm-Led Series C

The San Francisco-based DEX builder has processed $2.2 billion in trades and is now “hugely profitable.”

AccessTimeIconJun 15, 2021 at 2:42 p.m. UTC
Updated May 9, 2023 at 3:20 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Crypto derivatives exchange builder dYdX raised $65 million from crypto investment firm Paradigm and a handful of market makers after seeing its improved swaps protocol catch fire among users.

The Series C round of funding was joined by CMS Holdings, CMT Digital, Electric Capital, HashKey Capital and StarkWare Industries, a software company that supports the upgrade of dYdX’s low-fee trading platform. 

  • Crypto Market Leaders and Laggards in 2023
    01:50
    Crypto Market Leaders and Laggards in 2023
  • DeFi Market Rebounds to $50B as Speculators Hunt for Yield
    01:11
    DeFi Market Rebounds to $50B as Speculators Hunt for Yield
  • Ethereum Average Gas Fees Touched Highest Level in Six Months: Kaiko
    01:07
    Ethereum Average Gas Fees Touched Highest Level in Six Months: Kaiko
  • Could the Bank Secrecy Act Harm Crypto? Coin Center Thinks So
    38:54
    Could the Bank Secrecy Act Harm Crypto? Coin Center Thinks So
  • San Francisco-based dYdX said it will use the new capital to “significantly improve liquidity” during volatile trading periods. Additionally, the funds will go toward protocol decentralization, an expansion of perpetual swaps contracts, a mobile app and back-office hires.

    The beefed-up war chest makes the idea of decentralized exchanges meaningfully challenging the Coinbases of the world a smidge more concrete. Notably, Paradigm founder Fred Ehrsam was an early Coinbase executive.

    The exchange aims to be a decentralized hub for Ethereum-based crypto derivatives. Its biggest volume comes from the cross-margined perpetual swaps market, which has seen $2.2 billion in trading since a February technology upgrade that dramatically lowered user costs by skirting pricey Ethereum transaction fees.

    Success with swaps

    Perpetual swaps are comparable to bitcoin and ether futures contracts without an expiry date. Cross-margined means traders can use the same asset pool as collateral across multiple markets, instead of needing to deposit collateral in each market separately. That means more risk to the trader – but also higher potential reward. DyDx founder Antonio Juliano said it's more “capital efficient.”

    “We're doing about $40 to $50 million in volume every day on layer two” perpetual swaps, Juliano said, referring to the protocol upgrade.

    Nearly 30% of dYdX’s perpetual trading volume still flows through the exchange’s on-chain margin product; Juliano credited that activity to a handful of large investors. He said his team is dedicated to layer 2. 

    “We feel that's a better product and has a lot more growth potential,” he said.

    Big goals

    In the long run, Juliano said he’s positioning dYdX to be one of the largest crypto exchanges in the world by catering to derivatives, which he said is crypto’s biggest market. 

    “And the biggest thing that's happened I think in the crypto markets in the past year, is that the derivatives volume, really driven by perpetual contracts, has become bigger in terms of trading volume than everything else in crypto put together,” he said.

    Additionally, his team is betting that decentralized exchanges (DEXs) will ultimately prevail over their centralized counterparts because of their potential to offer avoid censorship and offer transparency and security to traders.

    “The thing we're really thinking is that the next really big thing is going to be derivatives on DEXs,” Juliano said.

    That bet appears to be paying dividends for dYdX – at least in the short term. Juliano, who said his exchange was in the red as recently as October or November, is now “hugely profitable.”

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.