State of Synthetix Q4 2024

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KEY INSIGHTS

In the fourth quarter of 2024, Synthetix implemented governance changes to streamline processes by adopting a single Spartan Council model.
Expanded derivatives product line with the acquisitions of Kwenta and TLX for $13.2 million and $4.0 million.
Open interest peaks at $67.1 billion for the year on November 21; quarterly daily average of $195.4 million, up 45% sequentially.
Launched 68 new perpetuals, 24 of which were first time platform-backed assets.
Average daily volume of $71.7 million in perpetuals, up 29% QoQ.

Key Metrics

Agreement Analysis

Perpetual Contracts

Q4 average daily perpetual volume was $71.7 million, up 29% from Q3 but down 50% year-over-year.

V3 perpetual contract usage slowed, with volume down 38% YoY.

Q4 total volume was $6.6 billion, or 0.9% of total on-chain perpetual volume ($740.5 billion).

SOL perpetual contract volume grew 53% Q4, overtaking BTC as the platform’s largest marketplace, with BTC in second place and ETH declining as a percentage of transactions.

Other perpetual markets grew 74% in volume.

68 new perpetual markets were added to the platform, with 24 first-time backed assets going live under SIP-387.

User activity

Synthetix’s overall activity metrics rebounded in the fourth quarter after declining throughout 2024.

The average number of daily trades in perpetual contracts increased by 25% sequentially, from 1,400 in the third quarter to 1,700 in the fourth quarter. Growth in the quarter was driven by Synthetix V2, which saw a 59% YoY increase in trades.

However, on a year-over-year (YoY) basis, the average number of transactions per day declined by 33% from 2,500 in Q4 2023.

The number of daily active users (DAUs) grew 14% YoY in Q4 to 236 from 207 in Q3. However, compared to 445 in the fourth quarter of 2023, it was down 47% year-over-year.

Synthetix V2 and V3 both saw growth in average daily active users, up 12% and 19% YoY, respectively. This indicates that core users are making up a larger portion of transactions on Synthetix.

Note that Synthetix V3 has not yet been deployed to the OP Mainnet and is currently only running on Base and Arbitrum execution layers, so its activity data comes from a different Layer 2 network environment.
Total Value of Locked Positions

Total Value of Locked Positions (TVL) is an important measure of Synthetix’s available liquidity on the chain at a given moment in time.

During the fourth quarter, Synthetix’s TVL remained essentially stable, increasing only 1% sequentially, and peaked at over $600 million during the quarter before ending the quarter at $378.9 million.

While TVL is an important reference point for measuring the size and liquidity of an agreement, it is not the only measure of success for a perpetual contract decentralized exchange (perp DEX).
Open Interest

Open Interest (OI) represents the total value of derivative contracts that are still active and not yet settled at a given point in time. For Synthetix, OI represents the total dollar amount of all current open perpetual contracts. A higher OI on the one hand implies higher risk exposure (more money locked up in positions), but on the other hand reflects strong demand for Synthetix perpetual contracts, as it indicates that users are actively opening and maintaining positions.

At the end of Q4, Synthetix OI stood at $67.5m, down 60% YoY (Q3 $166.7m). However, on November 21, OI hit an all-time high (ATH) of $376.1 million due to increased market volatility. Daily OI for the entire fourth quarter averaged $195.4 million, up 45% sequentially and up from $134.8 million in the previous quarter.OI trended upward in the run-up to the U.S. presidential election, reaching $208.9 million on November 5 (election day). With the election of Donald Trump, the crypto market witnessed a round of upward movement. Along with rising prices, investors’ risk appetite increased, boosting leveraged trading activity and driving open interest to continue rising.

In terms of the perpetual contract market, SOL was the asset with the highest average open interest for the first time this quarter. Its average monthly open interest in the fourth quarter was $84.9 million, up 115% from $39.4 million in the third quarter, and SOL accounted for 43% of the total average OI in the fourth quarter, while BTC was the second highest average open interest in the quarter, with an average monthly OI of $77.6 million in the perpetual market in the fourth quarter, and a combined average OI of 83% of the total average open interest in the fourth quarter. SOL and BTC together accounted for 83% of the average open interest in the fourth quarter. In contrast, ETH’s average open interest in the perpetual contracts market declined for the second consecutive quarter, partly due to ETH’s relatively weak price performance compared to other crypto-assets in Q4. ETH’s average OI of $15.2 million was down 27% from $20.7 million in the previous quarter.
Fees

Traders are charged a pending order fee when their order reduces market skew, i.e., mitigates the imbalance between long and short positions, and an order-taking fee when their order exacerbates market skew. Pending order fee and order taking fee are set according to the specific market and can be viewed in the trading interface. These fees are collectively referred to as exchange fees. In addition, traders may be subject to liquidation fees if the value of their collateral is insufficient to maintain their position in a perpetual contract.

Synthetix’s deployment on the OP Mainnet remains the central source of almost all of the perpetual contract exchange fees and liquidation fees in all deployments. On the OP Mainnet, transaction fees are not paid out directly as dividends, but rather through the destruction of sUSDs, thereby reducing the debt of SNX pledgers. However, according to the update to Proposal SCCP-373, the mechanism for distributing transaction fees for Synthetix perpetual contracts is adjusted as follows:

20% for V2 debt burn
20% allocated to integrators, e.g. Cyberdex, etc.
60% allocated to Synthetix V3 Liquidity Providers (LPs)

in the In the fourth quarter of 2024, trading and clearing fees for perpetual contracts on the OP main network totaled $2.8 million, up 64% sequentially from $1.7 million in the third quarter. In contrast, fees on the Base network declined 47% QoQ, totaling $268,100 in the fourth quarter. As for Synthetix’s deployment on Arbitrum, fee revenues have been low since it went live at the end of August 2024, until the fourth quarter when fees totaling $69.1 million were accrued.

Overall, Synthetix’s average daily handling fees across all deployments were $34.4k, a 42% increase from the previous quarter. However, from a year-over-year perspective, average daily fees decreased by 67% compared to $104.9 million in the fourth quarter of 2023.

Looking only at perp exchange fees: the SOL perp market generated the highest revenue in Q4 with $988,900 in exchange fees, up 52% YoY, while the BTC perp market came in second with $748,900, up 22% YoY. Meanwhile, ETH fees were down 31% YoY, reflecting Synthetix’s perp users’ gradual preference for trading other asset markets in the fourth quarter.
FINANCIAL ANALYSIS

MARKET CAPITALIZATION AND SUPPLY

SNX’s market capitalization in circulation rebounded in the fourth quarter, up 26% YoY from $517.6 million to $649.8 million during a period of generalized gains across the market. Additionally, the SNX token price increased 21% QoQ from $1.58 to $1.91, indicating that the market successfully absorbed approximately 4% of the SNX issuance additions during the quarter. The additional SNX issued during the quarter was primarily used to fund two strategic acquisitions completed by Synthetix DAO (see below).
Other Developments

Mobile trading support, fiat deposit/withdrawal integration and Gas-free experience in December.
Synthetix Exchange was upgraded in December to improve interface and fee efficiency.
Introduced one-click Gas-free trading.
V3 perpetual contracts support multiple collateralized assets.
SNX is included in the Coinbase 50 Index.
A new website was launched to unify access and product aggregation.

Summary Review

This quarter marked a significant change at the governance level of the Synthetix protocol. The DAO has officially moved to a single, partially elected, partially appointed Spartan Board governance structure. The new board is committed to addressing past governance inefficiencies and driving the long-term growth of the protocol under a unified vision. The new governance structure worked quickly to facilitate and complete two token exchange acquisitions of Kwenta and TLX. These acquisitions help Synthetix to vertically integrate and expand its product matrix.

Total open interest reached an annual high in the quarter, reaching $376.1 million on November 21 and ending the quarter at $67.5 million. Perpetual contract volume grew 29% to $6.6 billion in the quarter, while TVL remained largely stable, up only 1% sequentially.

On the other hand, average daily open interest (ADOI) increased by 62% to $195.4 million. Daily active users (DAU) grew 14% YoY and daily trades grew 25%. Synthetix successfully launched 24 new perpetual markets in the fourth quarter through the introduction of a new, streamlined market creation process, and SNX’s market capitalization outstanding grew 26 percent quarter-over-quarter to $649.8 million at the end of the fourth quarter.