The system is made so that the exchange and its partners always win, no matter what.
They ask the SEC to regulate the rules, not the technology.
The cryptoasset market is going through another of its cyclical declines, but this time, criticism no longer focuses on volatility, but on the very architecture of the system that amplifies the losses of retail investors.
Between October 10 and November 19, 2025, $560 billion of total market capitalization evaporated, with more than $25.5 billion in derivatives settled, according to data from CoinGlass. However, what is new is not the magnitude of these figures, but rather that The accusations now come from central actors in the ecosystem, pointing out structural flaws in the market design.
The most forceful criticism comes from the market’s own protagonists. Evgeny Gaevoy, CEO of Wintermute, was blunt about this. Wintermute is one of the largest market makers in the world, moving hundreds of millions of dollars daily on both centralized (CEX) and decentralized (DEX) exchanges.
According to Gaevoy: “The real problem is not perpetual futures themselves, but the structure in which centralized exchanges simultaneously monopolize the roles of market maker, order book and custodian.”
The executive warns that this vertical integration consolidates functions that in traditional finance are separated by regulation. But in its current form, it creates an inherent conflict of interest, where platforms have perverse incentives during periods of high volatility.
What Gaevoy denounces was demonstrated with brutal clarity on October 10, 2025. That was when one of the most violent crashes in recent market history of bitcoin and cryptocurrencies. In just a few hours, centralized exchanges liquidated more than $25 billion, due to the market being “deleveraged,” as reported by CriptoNoticias.
The most striking thing is not only the magnitude, but who ended up keeping the money. While millions of retail traders saw their accounts evaporate, exchanges and institutional participants benefited greatly. This result is not a coincidence: it is the direct consequence of the design of the perpetual derivatives system itself that dominate Binance, Bybit, OKX and the rest of the centralized platforms.
The mechanism that causes these “massacres” is known as a vicious circle or “recursive nature.” term coined by Arthur Cheung, founder of Defiance Capital. It works as follows:
When the price of bitcoin or Ethereum begins to fall sharply, the value of the collateral on the leveraged long positions decreases rapidly. Upon reaching certain levels, exchanges automatically liquidate those positions to protect themselvesselling the collateral on the open market.
That massive sell-off pushes the price even lower. This causes more accounts to enter the liquidation zone, generating new forced sales, and so on. The result is an unstoppable cascade of liquidations that amplifies the initial drop many times over, turning a strong move into a catastrophe.
In practical terms, this meant that Traders with long positions had to pay up to 0.6% daily to those who were short. With more than $19 billion settled during the first 24 hours, this mechanism transferred hundreds of millions of dollars.
This happened directly from the accounts of retailers who were betting on the upside to the pockets of those who were short, many of them large institutional liquidity providers and direct partners of the exchanges themselves. And here is what is truly new.
Crypto Market Makers Break Silence
All of this shows that the system is built for exchanges and their institutional partners to make money. Both in the explosive rises (charging commissions for the record volume) and in the brutal falls (charging settlement commissions plus the massive flow of the negative funding rate).
The leveraged retail trader, regardless of whether he gets the market direction right, ends up being the virtually guaranteed source of profits for the house and its allies. That is exactly what happened on October 10 and what will continue to happen as long as the current design of perpetual derivatives does not change.
But beyond all this event, the most curious thing is that It is not the plebs who are shouting “the system is broken”. It is being done by those who literally make prices move and exchanges earn billions in fees.
When these actors, who normally make money with the current architecture, publicly say “this is no longer sustainable and poorly designed.” The message has much more weight. It means that the great actors have broken the pact of silence and they are saying out loud what was previously only discussed in private chats.
It is not a minor detail, it is the clearest sign that the current CEX model is losing legitimacy, even among those who benefit most from it.
Wintermute pushes for a new model for exchanges
On November 18, 2025, Wintermute filed a proposal with the United States Securities and Exchange Commission (SEC) that goes far beyond the usual regulatory adjustments. Their initiative goes directly to the core of the centralized exchange business model, a design that, as structured today, systematically benefits from volatility at the expense of investors themselves.
Their proposals point directly to the three fundamental pillars of this “broken system.” It refers to vertical integration that creates conflicts of interest, dependence on single price oracles that amplify crises, and the absence of real institutional alternatives in the DeFi ecosystem.
In essence, the letter constitutes an architectural project for redesign the market from its foundations. In this way it seeks to make the original promise of the cryptocurrency sector a reality. This is eliminating single points of failure and unnecessary intermediaries that today concentrate risk and distort the market.
Your idea is reconfigure a system that accumulates the same risks that it was intended to overcome: rely on a single intermediary that holds user funds, controls prices, and can fail as a single point of failure
Here’s how Wintermute’s proposals address the “Roto system”:
1.-Break the vertical monopoly of bitcoin and cryptocurrency exchanges
Problem to solve: vertical integration where centralized exchanges act as custodians, clearinghouse and exchange simultaneously. This creates conflicts of interest and bottlenecks.
Proposed solution:
-Allow large professional players who act as intermediaries or counterparties, in almost all operations that users make on Binance, Bybit, OKX, to settle directly on-chain. This would eliminate dependence on the unique infrastructure of the CEX.
-This breaks the “all-in-one” model that Wintermute and other actors say creates perverse incentives during periods of volatility.
Direct Impact: By separating custody, execution and settlement functions, the structural conflict of interest that currently benefits CEXs during market crises is reduced.
2.-Reduce dependence on “centralized oracles”
Problem to solve: Reliance on single price oracles causing global distortions and on-chain liquidations during volatility events.
Proposed solution:
-Establish objective criteria based on multiple sources of liquidity (CEX, DeFi, OTC).
-This diversifies price sources and reduces vulnerability to single oracle failures.
Direct impact: mitigates the risk of cascading liquidations like those on October 10, where price differences of 12% between exchanges unleashed forced sales that did not reflect real values.
3.-Create a real alternative to the centralized system
Problem to be solved: the concentration of 95-97% of settlements in just five CEXs, while DeFi protocols represent less than 2%.
Proposed solution:
-Allow institutional liquidity providers to operate in DeFi without excessive regulatory burden.
-This encourages the development of decentralized infrastructure as a real alternative to CEX.
Direct impact: Create a parallel ecosystem where circuit breakers, like those in Drift. This higher DEX of perpetuals on Solana has already proven to prevent massive liquidations. This would demonstrate that the current model is avoidable, not inevitable.
The message from Wintermute and the big market makers is clear. They believe that the current system is not only broken; but it is repairable. And that 2026 may be the year in which it is finally fixed.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias. The author’s opinion is for informational purposes and under no circumstances constitutes an investment recommendation or financial advice.