Analysis: Wintermute spends tens of millions of dollars annually on front-running trades, but its cumulative profits are only marginally related to this

On-chain analyst Psyche stated that the market maker Wintermute spent approximately $824,000 in the past 30 days in the Gossip Priority auction on Hyperliquid, which translates to an annualized expenditure of about $10 million.

This mechanism will go live in April 2026, with auctions held every 3 minutes, offering a total of 3 priority seats. The highest seat can receive unexecuted trade data about 60 milliseconds earlier than participants without priority. Wintermute mainly bids for seat 0, winning approximately 74.7% of the relevant auction rounds in October. On-chain data shows that Wintermute, Selini Capital, and another unnamed market maker collectively contributed about 99% of the auction expenditure.

However, Wintermute has accumulated approximately $229.7 million in account profits since 2024, which cannot be directly attributed to trading priority. The auction mechanism will not be launched until April 2026, while Wintermute had already accumulated about $204 million in profits prior to that; in the approximately 7 months after launch, the account profit was about $25.6 million, with auction expenditure for the seats around $3.58 million during the same period.

The relevant accounts also hold a large number of perpetual contract hedging positions, so the cumulative profit and loss includes various sources of income from years of market making, directional trading, and inventory hedging, with trading priority only providing potential marginal improvements to market making operations.

It is noteworthy that Wintermute has significantly reduced its bidding since November 11, with daily average expenditures dropping from about $30,000 to around $10,000, concentrating bids in the hours following the opening of U.S. stock markets. The core value of Gossip Priority lies in allowing market makers to see pending orders earlier, enabling them to cancel or adjust quotes ahead of time, similar to the Last Look mechanism in traditional financial markets.

This means that large market orders from ordinary traders may face speed competition among market makers, and smaller market makers may be at a disadvantage due to the lack of priority. However, the ownership of the relevant wallets relies on third-party labels and is not officially disclosed by Wintermute.