An Overview of APX Finance: Will 1001x Leverage Help This $10B+ Perp DEX Come Out on Top?

The perpetual decentralized exchange (DEX) narrative is well and alive. In the last week of December alone, total trading volume crossed over $9 billion. Newer perpetual DEXs such as Hyperliquid, APX Finance, and Vertex Protocol are beating first-movers GMX and Gains Network to dominate in trading volume, though GMX retains a large market share when it comes to fees.

What’s clear is that the perpetual DEX wars are raging. In a saturated market like crypto derivatives, protocols fiercely compete to attract traders and liquidity providers (LPs) to their platforms.

In the following article, we’ll analyze the APX Finance platform, one of the bigger perpetual trading platforms based on major blockchains including BNB Chain and Arbitrum. We’ll determine if its standout feature — perpetual trading with an insanely high leverage of 1001x — is a boon or bane in the current climate.

How does APX Finance work?

Formerly known as ApolloX Finance, APX Finance launched a slew of product updates alongside its rebranding in the last few months of 2023. To be clear, APX Finance operates two perpetual trading modes: Version 1 (v1) order book perpetuals, and version 2 (v2) on-chain perpetual trading.

V1 is APX Finance’s genesis so to speak. Think of crypto futures trading on a centralized exchange (CEX) but with a decentralized finance (DeFi) wallet. That’s what APX v1 offers – a CEX-like order book trading interface with the security and privacy of a DEX. APX v2 is their fully on-chain rendition launched after the FTX collapse in November 2022.

The premise of APX Finance v2 is easy to understand. Like other popular on-chain derivatives protocols, APX Finance relies on a single liquidity pool on each supported blockchain — the ALP pool — to provide liquidity for trading pairs. Traders trade against the pool to earn profits from ALP, or, pay ALP if they lose. The pool also shares with liquidity providers real yield. LPs on APX Finance earn platform fees and staking rewards. Current yields hover around 45% APY.

Catering to the Degens with high-leverage

So what makes it different? Before ‘Degen Mode’, APX Finance already offered up to 200x leverage for crypto pairs, one of the highest in the perpetual DEX market. However, it was the aptly-named ‘Degen Mode’ that arguably pushed APX Finance into the (DeFi) public’s eye. ‘Degen’ is affectionately used to refer to traders who might prefer highly speculative trades.

‘Degen Mode’, an on-chain trading product under APX Finance v2, went live with 500x leverage for Bitcoin and Ether trading pairs in August 2023. They would later raise the maximum leverage from 500x to 750x, and to an enormous 1001x leverage before the year ended. This made APX Finance the one protocol to offer the highest leverage for crypto pairs in the derivatives market.

According to APX Finance, “During periods of high volatility, traders can maximize their gains with 0 slippage, high leverage and extremely low fees. In low volatility, traders can speculate on minor price movements.”

Traders seem to agree. Looking at volume metrics, ‘Degen Mode’ takes up the majority of total trading volumes on all APX Finance-supported chains since its launch.

Save for BNB Chain, ‘Degen Mode’ makes up __over 90% of total trading volume__s on Arbitrum, opBNB and Base blockchains. BNB Chain sees a more modest figure of at least over 50%.

APX Finance too offers traders other innovative products like ‘Dumb Mode’ — crypto price predictions within a chosen timeframe: 60s, 5 min, 10 min, 15 min and 30 min. However, it is arguably ‘Degen Mode’ that helped cement APX Finance as a platform for the ‘degens’.

$APX, ALP, and the flywheel effect

APX Finance is banking on the flywheel effect to create a positive cycle. As trading activity increases on the platform LP yields would be boosted to attract staking activity, which would then ensure that ALP can sufficiently support large trading volumes, further increasing trading activity. “Degen Mode” seems to be contributing positively to this.

Currently, the cumulative trading volume has crossed $10 billion. ALP total value locked totals around $15 million across chains, with the lion’s share captured by BNB Chain at $13.2 million.

LPs earn when APX Finance platform fees contribute to the net asset value of ALP (Fee APY) and when they receive staking rewards (Stake APY). On BNB Chain, ALP staking rewards are in APX Finance’s governance token $APX.

On opBNB, APX Finance tied up with PancakeSwap, the leading DEX on BNB Chain, to offer ALP staking rewards in their native token $CAKE. While there are no staking rewards available on Arbitrum and Base blockchains, LPs can still earn from platform fees.

All in all, APX Finance is establishing itself as one of the top perpetual DEXs, especially with its high-leverage product.

That said, it remains to be seen if high leverage is enough to retain their appeal in an environment of abundant trading incentives. Multiple popular perpetual DEXs on Arbitrum received grants from the Arbitrum STIP Grants in October last year. In the new year, APX Finance’s ability to keep up with such players in the space would become paramount.