Hayden Adams Says AMMs Will Win The Biggest Markets. A Former XTX Trader Says They're Going To Zero

Hayden Adams published his first blog post since 2019 on Monday night, arguing that automated market makers will take over the world's largest markets once tokenized assets begin trading against each other rather than against dollars. By Tuesday afternoon a former XTX Markets trader had replied that "AMMs are going to zero."

Most of the people who pushed back conceded Adams' core mechanism: pairing assets that move together does cut risk for liquidity providers. Their objections were about demand and permission — whether anyone wants to trade those pairs, and whether the people Adams expects to supply the liquidity are allowed to.

Adams' post, titled "Correlated Pairs: How AMMs Win the Biggest Markets," drew 229,000 views, 885 likes and 142 replies in its first 19 hours. Its core claim is that onchain liquidity has already organized itself into clusters — Ethereum assets against ETH, Solana assets against SOL, stablecoins against each other — because liquidity providers lose less when the two assets they hold move together. "No one designed that," Adams wrote. "It emerged organically." Tokenization, he argued, lets the same pattern reorganize equities: NVDA/USD becomes NVDA/SPY, with SPY/USD as the bridge back to dollars.

Bogle's Folly At Fifty

Adams built the argument on the index fund's 50th anniversary. Jack Bogle's First Index Investment Trust closed its public offering on Aug. 31, 1976, after aiming for $50 million to $150 million and raising about $11.3 million, by Bogle's own account. Index mutual funds and ETFs now hold $21.88 trillion against $18.83 trillion in active funds, a 53.7% share, per the Investment Company Institute.

The parallel Adams drew is that passive liquidity provision will displace professional market making the way passive investing displaced active management. He cited Citadel Securities trading close to 25% of US equity volume — a figure the firm's president Jim Esposito used himself in November — and a record $12.2 billion in net trading revenue on roughly $21 billion of trading capital. Citadel Securities publishes no financials; those two numbers were reported by Bloomberg citing people familiar with them. "Most people read those numbers as proof the system works," Adams wrote. "I read them as entrenchment."

His mechanism is cost of capital. Market makers hedge away price exposure and pay for the hedge; an investor who already wants to hold NVIDIA and SPY takes that exposure for free, and an issuer paying market makers to quote its asset has what Adams called a negative cost of capital. The tighter the correlation, he argued, the smaller the gap between a passive AMM curve and an active strategy, and the easier it is to undercut the firm.

AMMs Are Going To Zero

Brian Huang, co-founder of onchain portfolio app Glider and previously a trader at algorithmic firm XTX Markets, disagrees.

"At XTX Markets, I traded 4% of all US Equities volume on any given day. None of it ever went through an AMM and none of it ever will," he wrote. XTX publishes only a firm-wide figure of about $250 billion in daily traded volume across 35 countries, with no US equities breakdown.

His five objections ran from execution to distribution. Market makers need to place and cancel orders across thousands of assets at varying depths, which an AMM cannot do; instead, "you put up liquidity in a range and then acquire impermanent loss while getting picked off by takers." Managing inventory onchain means modeling network congestion and paying gas, against co-located hardware with measurable latency percentiles in traditional venues. AMMs do not segregate order flow, so "Wintermute should not be getting the same pricing as Joe in Minnesota."

Then he inverted Adams' democratization argument.

"Retail participants should not be making markets," Huang wrote. "The worst thing for retail to be doing is trading against other retail." He pointed at advertised yields on thin pools as evidence: "'452% on CASHCAT' is a great headline, but in reality the typical retail investor has no understanding of how an AMMs works."

The Defiant reported this month that Merkl campaigns on Robinhood Chain were advertising annualized rates between 1,274% and 36,540% on Uniswap v4 pools holding between $358 and $20,510.

Huang's alternative is the model tokenized equity issuers are already using: "All of the tokenized equity issuers are moving to a model similar to @Ondo whereby stocks are minted/redeemed through RFQ (no AMMs)," followed by dark pools and single-dealer platforms streaming quotes directly.

Two Pools, Two Fees

The most cited objection was about demand rather than supply. Katia Banina, chief executive of Wintermute-incubated trading venue Bebop, called the post "very good" and the index fund analogy "strong (if deceptive)," then took apart the pair structure.

"From the trading side though, those correlated pairs make little sense," she wrote.

"People don't trade financial assets against dollars out of necessity, but because dollars are money that buy goods and services. So most people would still want to do SPX/USD or NVDA/USD. So if the major pool for NVDA is paired with SPX, then you have to hop 2 pools and pay 2 fees." She also disputed the premise that correlation is tight enough to matter, noting that "single name vs index are very far from perfectly correlated."

Adams' post anticipates the routing half of this — "Investors can still buy and sell everything in dollars, since routing across pools is automatic" — without addressing the doubled fee. Huang endorsed Banina's framing: "Ofc correlated pairs limit impermanent loss, but as you've said, who tf wants to trade SPY/NVDA?"

Banina gave AMMs more time anyway. "LP-ing has been a long-standing strat for years," she wrote, adding that they generate arbitrage flow that both DEXs and chains want. "So I think AMMs might linger some more."

Derek Barrera, founder of liquidity-management protocol Steer Protocol, made a version of the same point from the other side: correlated pairs are where liquidity forms because impermanent loss is low, "but those edges don't generate a ton of volume." His argument for deploying them anyway is routing — keeping depth between correlated markets to capture multi-hop flow when the uncorrelated pairs skew.

Luca Prosperi, co-founder and chief executive of stablecoin issuer M^0, read the post favorably and landed on cost. "If there is one thing where AMMs do not excel, is capital efficiency," he wrote. "AMMs are excruciatingly capital inefficient." He expects intent-based frameworks supplying just-in-time liquidity to sit alongside the pools rather than be replaced by them.

Not A Market Maker Product

Guillaume Lambert, founder and chief executive of Uniswap options protocol Panoptic, answered Huang by rejecting the frame. "Of course market makers will complain they can't do what makes them $ on an AMM. AMMs are not a product for market makers. Period," he wrote. "This is probably the biggest mistake capital R Researchers are making, which is to apply spot market making concepts to Uniswap LPs."

On Huang's first objection specifically — that market makers cannot place and cancel orders across thousands of assets at different depths — Lambert wrote: "Yes, that's the point. Not having to pay someone to update quotes every 10ms is why AMMs are better for most assets."

The people who backed the thesis most directly were investors and Uniswap-affiliated accounts. Jesse Walden, founder of Variant, called it a "banger" and argued that most tokenization work is "sustaining innovation for incumbents" while AMMs plus tokenization would change "market making from active/professional to passive/automated." Kenneth Ng, co-founder of the Uniswap Foundation, pointed to memecoins paired against tokenized stocks as the live case and wrote that "AMMs enable programmable markets, but after almost $5t traded we're still early."

Whoever The Issuer Approves

Julian Kwan, chief executive of Singapore tokenization platform InvestaX, accepted the cost-of-capital mechanism and then flagged where it breaks for regulated assets. "Permissioned Pools enforce the allowlist at the pool level, and the allowlist belongs to the issuer," he wrote. "So the answer to who can be the LP is whoever the issuer approves. Granted, not open."

He also drew a line through the assets Adams cited as proof. "The ten stocks against SPY work because those tokens are price exposure, not ownership. Private credit against a tokenized Treasury fund is a different regime." The Defiant has reported on that distinction in Robinhood's stock tokens.

What Comes Next

Adams pointed to Uniswap v4 hooks as the second half of the thesis, naming the DualPool hook Uniswap shipped on Jul. 22, which parks pool inventory in ERC-4626 vaults between swaps so passive capital earns lending yield. Spark co-designed it and runs the largest deployment.

Responding to a reply on Tuesday, Adams said he "might have to do a version of the blog post that is 5x the length at some point that goes a bit deeper on some of the tradfi analogies."

Uniswap took $1.93 million in fees and $176,941 in revenue on Aug. 17, and $81.2 million in fees and $5.75 million in revenue over 30 days, according to DefiLlama. Protocol revenue routes entirely to UNI buyback-and-burn; the v4 fee switch was turned on Jul. 27, nearly tripling protocol revenue.

UNI traded at $3.30 late Tuesday, up 0.5% over 24 hours and down 11.8% on the week, with a $2.06 billion market capitalization and $125 million in 24-hour volume, according to CoinGecko. DEX spot volume is running at about 20% of centralized spot volume by DefiLlama's component data, and at 24% on The Block's monthly measure, a record. Adams' post put the figure at "over 20%."