As the meme coin scandals continue to unfold, the market is starting to shift its focus towards projects with solid fundamentals. A popular slogan in the community lately has been: "Fundamentals don't matter, until they do." One of the projects that this phrase refers to is Fluid - a rapidly growing DeFi protocol that combines lending and DEX, reshaping capital efficiency.
Fluid: Second Largest DEX on Ethereum
In less than 4 months, Fluid's trading volume has continued to grow, and this month (February) it has already surpassed January, making it the second largest DEX on Ethereum by trading volume:
- The 24-hour trading volume has exceeded $300 million, with a cumulative trading volume of over $13 billion.
- Messari statistics show that Fluid now typically accounts for over 10% of Ethereum DEX trading volume.
- On the USDT/USDC trading pair, Fluid has the largest market share; the ETH/USDC trading pair launched in December has already reached a 20% market share. (Dune real-time data)
- Rapid expansion of the lending market: Token Terminal data shows that Fluid's active loan volume has increased by 15.9% in the past 7 days, making it one of the top three fastest growing lending protocols.
- Significant growth on Arbitrum within 7 days: The lending market TVL grew by 57% to over $50 million, and the trading volume entered the top 10 Arbitrum DEXes.
Co-founder Samyak Jain stated that the target for the next 30 days is to exceed $100 million in TVL and become one of the top 3 DEXes on Arbitrum.
So, what has enabled Fluid to rise so quickly? It's thanks to its innovative mechanisms.
How did Fluid stand out?
Fluid was built by the team of the one-stop DeFi management platform Instadapp (@Instadapp). Initially a lending platform, it quickly gained market favor due to the following features:
- Lowest liquidation penalty fees (see the post below)
- Higher LTV (Loan-to-Value):
- Up to 92% LTV for volatile assets
- 95% LTV for stablecoin-based assets (e.g. wstETH/ETH)
- Higher LTV also means higher liquidation thresholds
- Minimal impact on liquidation: Only the necessary portion of the debt is liquidated to restore the position's health, rather than a one-time liquidation of a large amount of assets.
In simple terms, when borrowing on Fluid, you can borrow more funds, with lower liquidation risk and smaller penalties. Fluid has now become the 5th largest lending protocol on Ethereum by TVL, with a total TVL of $830 million.
'SmartLending' Creates a New DEX
Building on this foundation, Fluid launched a new DEX in late October 2024, using two key features - Smart Collateral and Smart Debt - to allow users' collateral and debt to be used simultaneously for DEX liquidity, further amplifying capital efficiency.
- Smart Collateral: Unlike traditional lending protocols where collateral can only be used as debt security, Fluid allows it to be used for DEX liquidity as well, earning both trading fees and lending interest, thereby improving capital efficiency.
- Smart Debt: Fluid allows debt to also provide liquidity for the DEX, enabling users to offset borrowing costs through trading fees, and in some cases even achieve "negative borrowing costs" - where borrowing not only incurs no interest, but also generates profits.
With the launch of the DEX, borrowing on Fluid can increase lending income while reducing borrowing costs.
Let's look at an example - the ETH/USDT-USDC market on Fluid, which has the Smart Debt feature. Due to the 0.98% trading fee, the borrowing rate is reduced from 6.7% to 5.72%.
More importantly, with Fluid's up to 95% LTV mechanism, the leverage effect is even stronger:
- 95% LTV means 20x leverage (1/(1-0.95))
- This will form a 39x LP pool (20x collateral/19x debt), meaning that by borrowing $1 on Fluid, you can provide $39 of liquidity to the Fluid DEX, significantly amplifying the trading fee revenue.
This model creates a powerful flywheel effect: low-cost, high LTV borrowing → TVL growth, deeper liquidity → DEX aggregators prioritize routing to Fluid → increased fee revenue, further reducing borrowing costs.
This is the reason for Fluid's rapidly increasing market share, which is also reflected in the FLUID token price.
FLUID token price surges 43.8% in a single month
According to CoinGecko data, the FLUID token is currently priced at $7.83, up 6.5% in the last 24 hours, 21.2% in the last 7 days, and an impressive 43.8% over the past month, making it one of the best-performing tokens among the top 300 DeFi projects by market capitalization.
Developments to watch for in the future
In the coming year, the following developments in Fluid are worth keeping an eye on:
- V2 upgrade (officially stated to increase performance by over 10x)
- Expansion to more blockchains and support for more assets
- Whether market share will further increase, challenging Uniswap? (Founder Sowmay Jain shared competition data with Uniswap on the 19th)
- Token incentive measures (such as buybacks, with token economics indicating that a maximum 100% revenue buyback program will be initiated when annual revenue reaches $10 million)
- Potential listing (the founder revealed that they have negotiated with exchanges and reserved $FLUID for listing purposes)
- Collaboration with Jupiter: Solana's largest DEX aggregator Jupiter previewed a collaboration with Fluid at the Catstanbul conference, and founder meow also wrote an article introducing Fluid in late January, so their future cooperation is worth watching.
While FLUID's price surge may not be as dramatic as meme coins, with the Trump family's DeFi project WLFI igniting market enthusiasm for a DeFi revival, Fluid has become an important player in the current DeFi landscape that cannot be ignored.
Team and Funding Background
The Instadapp team is composed of seasoned experts in the DeFi field, with co-founders Sowmay Jain (@sowmay_jain) and Samyak Jain (@smykjain), who are brothers. Additionally, Thrilok Kumar (@thrilok_kumar) serves as the Head of Product, and @DeFi_Made_Here is also a core team member.
Instadapp has raised a total of $12.4 million through two funding rounds:
- 2021: Completed a $10 million funding round, with investors including Standard Crypto, Alliance DAO, LongHash Ventures, and DeFi pioneer Andre Cronje.
- 2019: Raised $2.4 million, with support from renowned investors such as Naval Ravikant, Balaji Srinivasan (former Coinbase CTO), Coinbase Ventures, and Pantera Capital.
With the team's extensive DeFi experience and resources, they have laid a solid foundation for the protocol's continued development. Co-founder Samyak Jain has previously stated that Fluid's vision from the outset has been to become the infrastructure for the future financial system, and they plan to further expand into derivatives, credit markets, cross-chain bridges, stablecoins, RWAs, interest rate swaps, and foreign exchange markets, making this project worth keeping on your watchlist.
