ARK Invest’s director of digital assets research, Lorenzo Valente, said on July 28 that crypto is entering its deepest consolidation phase, with revenue and investment flowing toward fewer businesses. 

He said Hyperliquid and Pump.fun account for 67% of application revenue and that adding Ethena lifts the top-three share to almost 80%.

Valente expects more mergers and acquisitions, Chapter 11 filings, shutdowns and talent-focused acquisitions in the coming months. He also claimed revenue concentration had reached record levels across applications, middleware and Layer 1 networks. However, his post did not identify the dataset, category definitions or measurement period behind those figures.

ARK Invest data shows application revenue concentrating

ARK’s Q1 2026 DeFi report provides earlier evidence of concentration, although its figures differ from Valente’s newer post. The report said total application revenue fell about 23% quarter-over-quarter to approximately $485 million. Hyperliquid generated about $145 million, Pump.fun produced $123 million and Axiom earned $58 million during the quarter.

Those three applications, not Hyperliquid and Pump.fun alone, accounted for roughly 67% of tracked application revenue through March 31. The difference does not necessarily contradict Valente’s July figures because he may have used a newer period or another classification. It does mean the 67% and 80% shares should remain attributed to his analysis rather than presented as independently confirmed measurements.

Current public dashboards also show why methodology matters. DefiLlama records $37.46 million in 30-day protocol revenue for Hyperliquid and $20.32 million for Pump.fun. For Ethena, it records $14.41 million in fees but only about $42,365 in retained protocol revenue after costs. Gross revenue, fees and revenue retained by a protocol are not interchangeable measures.

Recent bankruptcies and closures support the warning

Storj Labs filed voluntary Chapter 11 proceedings on July 26 in the U.S. Bankruptcy Court for the Northern District of West Virginia under case 5:26-bk-00512. Storj said it plans to keep its storage network operating while addressing legacy obligations under court supervision.

Separately, BitMEX said it will close its exchange on Sept. 23 after parent HDR Global Trading completed a strategic review. BitMart’s official wind-down notice stopped new registrations and deposits from July 26. BitMart plans to end trading on Aug. 26 and cease platform operations on Jan. 31, 2027.

RootData’s 2026 dead-project archive lists 99 projects that announced closures, entered bankruptcy or remained unavailable for extended periods. That total provides wider context but should not be described as 99 insolvencies because the database combines several types of failure and inactivity.

As previously reported, ZeroLend also announced a shutdown in February after citing sustainability, liquidity and operating risks. Together, these cases show that closures are occurring across centralised exchanges, lending protocols and infrastructure businesses rather than within one market segment.

Crypto M&A is targeting established infrastructure

Consolidation is also occurring through acquisitions. Payward, Kraken’s parent company, agreed on July 27 to acquire Magic Labs’ wallet-as-a-service business. The acquired infrastructure has supported more than 60 million wallets, over $10 billion in stablecoin volume and about 200,000 developers, according to the company release.

The transaction will add embedded, non-custodial wallets to Payward Services. Financial terms were not disclosed, and the parties expect closing within weeks, subject to customary conditions. As crypto.news reported, the deal gives Payward an established wallet stack and developer base rather than requiring the group to build both internally.

In related coverage, Pump.fun’s revenue and volume remained below 2025 levels despite product and fee-policy changes. That contrast fits Valente’s wider argument: a project can remain among the sector’s largest earners while facing weaker activity than during an earlier peak.

What happens next in the consolidation cycle?

The next confirmed milestones will come from corporate deadlines and court records. BitMEX users must close positions and withdraw assets before the Sept. 23 shutdown. BitMart users face the Aug. 26 trading cutoff, while Storj’s restructuring will proceed through court motions, creditor claims and any required approvals.

Payward’s Magic Labs transaction is expected to close within weeks. Valente did not give a numerical forecast for future deals, bankruptcies or shutdowns, and his post did not link to a separate ARK timetable. The expectation that consolidation will accelerate therefore remains a forward-looking assessment supported by recent cases, not a confirmed outcome.

Every guide tells you a perp DEX is a decentralized exchange for perpetual futures. Almost none tells you that the label covers three incompatible designs, that who takes the other side of your trade differs completely between them, and that the difference only becomes visible during the hour you most need to understand it.

The definition of a perpetual decentralized exchange takes one sentence and explains almost nothing useful. Yes, a perp DEX is a platform for trading perpetual futures on a blockchain from a wallet you control. That sentence covers venues whose internals have almost nothing in common: one where your order rests in a public book and fills against another trader, one where a pool of depositors automatically takes the other side of everything you do at a price fed by an oracle, and one where matching happens off-chain while settlement happens on it. Those are different products wearing one label, and the difference is invisible in calm markets and decisive in violent ones, which is exactly the wrong distribution for a fact to be hidden. This guide starts with the instrument, then separates the architectures, then follows the risk chain that all of them share, because a trader who understands which machine they are inside understands what can actually go wrong.

The instrument first

Before the venue, the contract, because everything downstream follows from its structure.

A perpetual future is an agreement to take on price exposure to an asset without owning it and without an expiry date. You post collateral, open a long or a short, and your position gains or loses as the price moves, with leverage letting the position exceed the collateral behind it. Traditional futures solve the problem of keeping contract prices near spot prices by settling on a fixed date, which forces convergence. Perpetuals have no such date, so they use a different mechanism: the funding rate, a periodic payment flowing between longs and shorts depending on which side is more crowded. When the contract trades above spot, longs pay shorts, making the crowded side expensive to hold and pulling the price back. When it trades below, the flow reverses.

Two consequences deserve emphasis because new traders consistently miss them. First, funding is a real, recurring cost or income, not a technicality, and over a long hold in a persistently one-sided market it can dominate the profit or loss from price movement itself. Second, the design was invented in crypto, introduced in 2016, and became the dominant derivatives structure in the asset class, which means the vast majority of crypto derivatives volume trades in instruments with no settlement date and a payment stream that most participants never model.

Leverage completes the picture and supplies the danger. Collateral supports a position larger than itself, and when the position moves against you far enough that your collateral no longer covers the potential loss, the venue closes it. That event is called liquidation, it is automatic, it is priced off a reference calculation, not the last trade, and it is the single most common way retail participants lose money in these markets.

Three architectures

Here is where the generic explanations stop and the useful part begins. Perp DEXs solve one hard problem, how to have a counterparty, in three incompatible ways.

The on-chain order book. Traders post bids and offers into a book, and the venue matches them against each other, exactly as a traditional exchange does. Your counterparty is another trader. The design’s advantage is that pricing emerges from the book instead of from an external feed, so it can support tight spreads, professional market makers, and large size without a pool absorbing the risk. Its difficulty is technical: maintaining an order book with fast matching and cancellation is demanding on a blockchain, which is why venues using this model have generally built dedicated infrastructure instead of deploying onto a general-purpose chain. Its stress behavior is the classic one: when the book thins, liquidations execute at worse prices, and the gap between the liquidation price and the achievable price becomes somebody’s loss.

The pooled-liquidity model. Depositors contribute assets to a shared pool, and that pool takes the other side of every trade, with prices supplied by an oracle instead of discovered in a book. The advantage for the trader is that liquidity is always present at the quoted price with no slippage of the usual kind, and the advantage for the depositor is a yield derived from fees and, structurally, from trader losses. The costs are two: the venue depends entirely on the oracle’s accuracy, making price feed manipulation the primary attack vector, and the depositors are collectively the house, which means a period in which traders are systematically right is a period in which the pool loses money. That is not a malfunction; it is the design working as specified.

Hybrids and vault-backed books. Several major venues combine elements: an order book for matching, with a protocol-owned vault providing liquidity into that book and acting as the backstop counterparty when liquidations cannot clear on the open market. This structure gives traders order book pricing and gives the venue a capital buffer, funded by depositors who are compensated for absorbing exactly the events order books handle worst. The trade is that vault depositors, who often understand themselves as passive yield earners, are in fact short volatility and long the venue’s operational competence, which is a considerably more complicated position than an advertised annual percentage rate suggests. Crypto.news has also audited the category leader, where these design choices now carry market-wide importance.

The practical instruction: before using any venue, settle which of these three you are in. The answer determines whether your counterparty is a trader, a pool, or a hybrid, and therefore what stress does to your position.

Trade.xyz said it will cover eligible liquidation losses tied to an SK Hynix price anomaly that struck at 23:01 UTC on July 27. 

The SKHYNIX mark price fell from $1,127.90 to $917.25, an 18.7% decline that triggered forced closures of leveraged long positions.

The company called the reimbursement a one-time discretionary decision rather than a promise of similar action during future market disruptions. It has not disclosed the total compensation amount, eligibility formula or an exact distribution date. Trade.xyz said requirements will be released soon and payments should follow in the coming days.

Hyperliquid had earlier said the market was independently deployed and operated by Trade.xyz, which was investigating the event. That distinction matters because HIP-3 allows external builders to define and maintain market-specific pricing inputs rather than relying entirely on validator-operated feeds.

What caused Trade.xyz’s SK Hynix liquidations?

The move began when one SK Hynix share traded at 1.272 million won as South Korea’s NextTrade pre-market opened on July 28. The print was 29.96% below the prior close of 1.816 million won and hit the daily lower price limit. The stock returned to the 1.7 million won range about two minutes later as buy orders arrived.

Korean market reporting attributed the isolated print to a possible order mistake during thin liquidity. NXT uses continuous matching in its pre-market, unlike the call-auction process used before the Korea Exchange’s regular session. That structure allowed a single share to establish an executable market price before deeper orders appeared.

The underlying stock later closed the regular Seoul session at 1.55 million won, down 14.65%. That was a steep verified market decline, but it remained far above the isolated NXT print. SK Hynix released its second-quarter results on July 29, adding separate fundamental news after the anomaly.

Trade.xyz says its oracle followed its specification

In its official statement, Trade.xyz said multiple independent data providers relayed the executed NXT trade. Its oracle was tracking the external venue and therefore behaved according to its published design, even though the price did not represent a deep or durable market.

Trade.xyz operates the SK Hynix perpetual under Hyperliquid’s HIP-3 framework. HIP-3 deployers provide oracle and mark-price inputs for their markets, while Hyperliquid supplies the order book, margin and liquidation infrastructure. 

As crypto.news reported in its initial coverage, available evidence points to an external price passing through the system, not a blockchain or smart-contract compromise. In related coverage, crypto.news also examined how control is divided across Hyperliquid.

Compensation criteria and totals remain unknown

Trade.xyz said it will cover liquidation losses “attributable to this anomaly,” but that wording leaves the final scope unresolved. The platform has not said which accounts qualify, what time window it will use, how it will treat partial liquidations or whether recovered positions affect payments.

The company also has not said whether distributions will be automatic or require claims, or which block and price records will determine eligibility. Affected users will need the forthcoming notice before they can verify whether their losses fall inside the programme.

On-chain tracker Lookonchain estimated that more than $80 million in SKHX positions were liquidated. Trade.xyz has not confirmed that figure or stated its expected reimbursement liability. The estimate should therefore remain separate from the company’s eventual verified payout total.

South Korea’s Financial Services Commission (FSC) reportedly plans to draft a consolidated Digital Asset Basic Act with the ruling Democratic Party, giving lawmakers a government-backed proposal covering stablecoins and the broader cryptocurrency market after months of delays.

According to an Edaily report published Wednesday, the FSC told the National Assembly ahead of a policy briefing that it intends to introduce a consolidated bill. The proposal would reportedly cover stablecoin issuance and circulation, digital asset business rules, exchange entry requirements, disclosures, internal controls and system-resilience standards.

A consolidated government-ruling party proposal could provide a central framework for negotiations. At the moment, 10 separate digital asset and stablecoin bills are already pending in Parliament, while disagreements have prevented South Korea from settling key elements of its second-stage crypto legislation. 

The FSC has not finalized when or how the consolidated bill will be introduced. Key disputes remain over whether won-denominated stablecoin issuers should be majority bank-owned and whether ownership limits should apply to major crypto exchanges. 

Opposition crypto tax repeal bill heads for review

Separately, the National Assembly’s Finance and Economic Planning Committee was scheduled to table an opposition bill on Wednesday that would abolish South Korea’s crypto income tax before its Jan. 1, 2027 implementation.

The Income Tax Act amendment was introduced on March 19 by People Power Party lawmaker Song Eon-seok. It aims to delete the provision taxing income from transferring or lending digital assets. Once tabled, it is expected to be referred to the committee’s tax subcommittee for detailed consideration, Edaily reported.

A separate repeal petition backed by more than 50,000 people is also expected to go before a petitions subcommittee. However, neither subcommittee has been fully constituted, and no review dates have been set.

Related: South Korea draft bill puts stablecoins, RWAs under finance laws: Report

From Jan. 1, 2027, income from transferring or lending crypto exceeding 2.5 million won (about $1,700) annually is set to face a 20% tax plus a 2% local income tax. 

The government and ruling Democratic Party support implementing the tax, while the opposition argues that taxing crypto while most ordinary stock investors remain exempt is unfair. On May 7, the Finance Ministry said the tax would proceed after repeated delays.

Magazine: Inside the ‘fake police raid’ that forced a $1M Bitcoin transfer

Argentina’s banking-backed groups have moved closer to launching peso stablecoins for businesses, introducing digital peso projects designed for programmable payments while the country’s banking sector remains barred from offering crypto services directly.

According to a report by Iproup, two financial holding groups with banking operations are developing Argentine peso-backed stablecoins through separate virtual asset subsidiaries, positioning the products for institutional users rather than retail customers. 

The projects are being advanced outside the banking entities themselves because the Argentine Central Bank has prohibited private banks from providing crypto-related services since May 2022.

BIND Group, which manages more than $2 billion in assets and owns BIND Banco Industrial, is developing a peso-backed stablecoin through its virtual asset service provider BEN, the report said. Earlier this year, BEN also entered a partnership with Circle to give institutional clients access to USDC for treasury management and payment applications under Argentina’s regulatory framework.

A second initiative is being prepared by Petersen Group through one of its subsidiaries with technical support from crypto infrastructure provider Lirium, according to Iproup. The stablecoin, known as DIPE, already has a published whitepaper, suggesting the project has progressed beyond the early planning stage.

Although neither offering has been launched publicly, both target corporate treasury operations instead of consumer payments. According to the report, the digital pesos are intended to support programmable payment conditions, collateral management, and treasury settlement using blockchain infrastructure.

Peso stablecoins target enterprise payments

Unlike U.S. dollar-backed stablecoins such as USDT and USDC, which have become popular in Argentina as a hedge against peso depreciation, the new projects focus on digitizing the local currency for business use.

Institutional customers could use the tokens to automate transactions triggered by on-chain events, manage collateral-backed lending arrangements, and streamline treasury operations, Iproup reported. Because the stablecoins are being developed through licensed virtual asset subsidiaries rather than banks themselves, the initiatives currently remain outside the scope of the central bank’s restrictions on financial institutions.

The report added that banking-backed ownership could eventually help expand adoption if regulators later allow banks to provide digital asset services directly. Argentine authorities are reportedly evaluating whether to ease the current restrictions, although no formal policy change has been announced.

Regulatory scrutiny has already emerged for peso-linked stablecoins. In March, Argentina’s national securities regulator questioned the argt peso stablecoin, stating that it constituted a security being offered without complying with applicable regulations.

Banking-backed stablecoins build on earlier digital peso efforts

The latest projects are not Argentina’s first attempt to tokenize the national currency.

In December 2022, lawmakers in the province of San Luis approved legislation establishing the legal framework for CityCoin, officially known as Activo Digital San Luis de Ahorro. The provincial stablecoin was designed to be backed by the government’s liquid financial assets while supporting blockchain-based public services, administrative efficiency, and financial innovation. 

The framework also authorized blockchain education initiatives and additional public-sector applications, although operational details for the stablecoin were left to future implementation.

Unlike the San Luis initiative, which was introduced through provincial legislation for residents, the new peso-backed tokens are being developed by private financial groups and focus on enterprise financial infrastructure rather than public-sector digitalization.

Stablecoin competition continues to expand across Latin America

The Argentine projects also arrive as stablecoin adoption gains traction across Latin America’s banking sector.

Earlier this month, Tether reportedly invested $20 million in Argentine digital bank Ualá as part of the lender’s $197 million funding round, according to Bloomberg. The investment followed Tether’s recent backing of Brazilian exchange Mercado Bitcoin and Argentine crypto platform Belo, extending the company’s strategy of supporting digital payment infrastructure throughout the region.

Elsewhere, the Bank of the Philippine Islands (BPI) recently launched a pilot program using stablecoins as the settlement layer for cross-border remittances. Under the project, international payments are settled through stablecoin rails before being converted into Philippine pesos for deposit into customers’ bank accounts, allowing blockchain-based settlement while keeping funds within the regulated banking system.

Stablecoin usage keeps growing despite supply pullback

The institutional focus of Argentina’s proposed peso stablecoins also comes as blockchain-based dollar payments continue expanding globally.

CoinDesk Data reported that the global stablecoin market fell 2.39% during June to about $312 billion, recording the first monthly contraction in five months. Even so, Visa’s Allium-powered dashboard showed adjusted stablecoin transaction volume climbed to a record $1.79 trillion during the same month.

The June figures indicate that stablecoin usage remained active despite lower circulating supply. Visa’s adjusted dataset includes filtered economic activity such as exchange transfers, decentralized finance transactions, lending, and on- and off-ramp activity rather than only merchant payments.

Every leveraged crypto venue has a mechanism that can close your profitable position without asking, and it fires precisely when you are most right. It is the last step in a risk waterfall, it selects victims by a published formula, and it works differently on every architecture.

Here is how it operates and what actually reduces your exposure to it.There is a category of financial risk that traders learn about only at the moment it costs them money, and in crypto derivatives the leading example is auto-deleveraging. The mechanism is simple to state and hard to accept: on a venue where you hold a large, profitable, leveraged position, the exchange may close part or all of that position without your consent, at a price you did not choose, because someone on the other side blew up so badly that the venue cannot cover the shortfall any other way. You did nothing wrong. Your analysis was correct. Your position is being reduced precisely because it was working. Every major perpetual futures venue, centralized and decentralized alike, has some version of this mechanism, and it is disclosed in their documentation, which almost nobody reads until afterward. This guide explains why the mechanism must exist, where it sits in the sequence of defenses, how venues decide whose positions to cut, how the architectures differ, and what a trader can actually do to reduce exposure to it. For the venue layer, crypto.news has explained the venues where ADL lives.

Why the math has to close

Start with the structural fact that makes the mechanism unavoidable, because auto-deleveraging is not a policy choice that a more generous venue could simply skip.

Perpetual futures markets are zero-sum. Every long position has a matching short position, and the profit on one side is funded by the loss on the other. Positions are backed by collateral, and collateral is finite. In ordinary conditions this balances: a losing trader’s collateral covers the winning trader’s gain, the venue takes fees, and nobody thinks about the plumbing.

The problem arises when a losing position moves further against its holder than their collateral covers. The venue tries to close it, but if the market gaps, or the asset is thinly traded, or everyone is liquidating simultaneously, the position may only close at a price far worse than the point at which the collateral ran out. The difference between what the collateral covered and what the market actually delivered is a shortfall, and that shortfall is real money that must come from somewhere. It cannot be conjured. There are exactly three sources: a fund the venue maintains for the purpose, the venue’s own capital, or the profits of the traders on the winning side.

Auto-deleveraging is the third option, exercised when the first two are exhausted. Framed that way it is less outrageous than it feels: the alternative to reducing winning positions is a venue that becomes insolvent and cannot pay anyone, which is worse for the same winners. The mechanism is unpopular and defensible at once, and both facts should be held together.

The waterfall

Venues describe their defenses as a sequence, and auto-deleveraging is deliberately the last step, which is why encountering it means several earlier things already failed.

Maintenance margin. Your position must keep collateral above a threshold. This is calculated against a reference or mark price computed by the venue, typically blending external market data, and not the last trade on the venue itself, which prevents a manipulated tick from triggering mass liquidations.

Liquidation into the market. Breach the threshold and the venue closes your position by sending it to the order book, ideally near the bankruptcy price, the point at which the collateral is exactly consumed. Most liquidations end here, and the loss is contained to the trader who took it.

The backstop. If the market will not absorb the position at an acceptable price, the venue’s buffer takes it: an insurance fund accumulated from prior liquidations that closed better than expected, or, on several decentralized venues, a protocol vault whose depositors have collectively agreed to be the counterparty of last resort in exchange for a share of fees and liquidation proceeds. This layer exists to make the next step unnecessary, and most of the time it succeeds. In severe events, well-capitalized vaults have profited handsomely from absorbing distressed positions at discounts and unwinding them into the recovery.

Auto-deleveraging. When the buffer is exhausted or the shortfall exceeds it, the venue reduces positions on the profitable side to close the gap. Positions are closed at the bankruptcy price of the liquidated counterparty, not at the market price, which is why the outcome feels arbitrary to the person on the receiving end. The venue’s books balance, the market continues, and someone who was winning has a smaller position than they did five minutes ago.

How you get selected

Selection is formulaic and disclosed, which means it is also, to a degree, manageable.Venues maintain a ranking of positions on each side, and while the exact formula varies, the ingredients are consistent: unrealized profit, effective leverage, and position size. The most profitable and most leveraged positions rank highest and are deleveraged first, on the reasoning that they have the most cushion to absorb the reduction and that high leverage is itself a contribution to systemic fragility. Many venues display a trader’s current rank in the queue as an indicator, often as a simple visual scale, and that indicator is one of the most useful and least examined pieces of information on any derivatives interface.

Two practical implications follow, and they are the closest thing to actionable advice this mechanism permits. First, leverage is the variable you control that most directly affects your ranking, so the same directional exposure taken with lower leverage and more collateral sits lower in the queue. Second, the indicator is live, meaning a trader in a violently trending market can see their exposure rising and choose to realize some profit instead of being reduced involuntarily at a price they did not select.

Three architectures, three profiles

The likelihood of encountering auto-deleveraging depends less on your trading than on the venue’s design, which is the aspect most explanations skip entirely.

Insurance fund venues. The traditional model, used by most centralized exchanges: a fund accumulates from liquidations that close better than the bankruptcy price and pays out shortfalls when they close worse. Its adequacy is a published number, and its health is the single best predictor of whether a venue will need to deleverage during a stress event. A fund that has been drained by a recent cascade is a venue where the next cascade reaches winners faster.

Vault-backed venues. Several decentralized venues route the backstop through a protocol vault funded by depositors, where the liquidation engine hands distressed positions to the vault instead of to an anonymous fund. The economics are more transparent, since the vault’s positions and balance are publicly visible, and the risk is more explicitly allocated, since depositors know they are the buffer. The practical effect for traders is similar: a large, healthy vault absorbs more before deleveraging becomes necessary. The practical effect for depositors is that they hold the tail risk the mechanism would otherwise distribute to winners, which is the trade they were compensated for. Crypto.news has also examined a vault-backed architecture in its Hyperliquid governance audit.

Pooled-liquidity venues. Where a pool is already the counterparty to every trade, the shortfall lands on the pool by construction, and the response is typically to adjust the pool’s exposure or its pricing instead of deleveraging individual traders. The risk does not disappear; it moves earlier in the chain and lands on depositors continuously and not on winners suddenly.

The general rule that falls out: the deeper and better capitalized the buffer between liquidation and winners, the further you sit from involuntary closure, and that buffer’s size is public information on every venue worth using.