Long time no see. The market has been crabbing for the last few days and a lot of uncertainty is going on. Is it a bearmarket rally? Are we going to pump into the merge? Or we going to dump before?
Many questions, few answers. My opinion? I’ve no idea. People claiming they do, most likely don’t. The only thing you can do is simply investing in projects that have good fundamentals. This is why I love the current state of the market: most of retail is gone or is not active in crypto anymore. The result? Builders keep building while project opportunists from the bullmarket are doing nothing. It’s good as it’s easier to filter out the ones that will survive the bearmarket. One of the projects that I believe will survive during this bearmarket is: GMX.
GMX - Arbitrums golden goose
GMX is a decentralised perpetual contract platform. Basically a Bitmex/FTX perps but decentralized. They support low fees and allow users to have leverage trading up to 30x. They are the leading decentralized derivative platform on Arbitrum. I have covered GMX in a thread back in early july when it was trading at around 16 usd. I was already bullish on it, it rallied so I didn’t bother shilling it anymore. It reached 50 usd and is now trading at around 34 usd. A perfect moment for me to bring out a shill article without screwing readers imo. Let’s get into it.
Why is GMX so special? There are several reasons why I believe GMX is unique and could be a big sleeper. First of all, the team had a track record with XVIX and Gambit. Problem with these protocols were the ponzinomics with the token inflation. The devs, in particular ‘‘X’’, really listened to the feedback of the community. This resulted in a new protocol born on Arbitrum: GMX. They implemented two important factors that is quite unique:
The staked GMX tokens are being paid in ETH. Something that wasn’t a thing before as most staked tokens in DeFi are being paid by their own token inflation (example: staked Sushi are being paid in Sushi and not ETH). This is what kickstarted the narrative of ‘‘Real Yield’’, where you get ‘‘Real’’ value for you staked tokens (and not some worthless governance token).
Good tokenomics model that is non-inflationary: GLP doesn’t require a farm and dump style of token incentive. GMX uses GLP, a basket of ETH, BTC, LINK, UNI, USDC, USDT, and FRAX to provide margin trading and swaps on the protocol. Swaps are then executed based on pricing from Chainlink
oracles, which allows GLP to offer zero slippage swaps and low fees of 0.1% per trade.
Dual value accrued tokens
There are two tokens: GMX and GLP
GMX: Betting on growth. earn 30% of the fees. Earn regardless of market direction or trader profitability. 85% of the supply is already staked (!!). esGMX is making it more deflationary.
GLP: Its an index (basket of btc, eth, usdc etc.). Earn 70% of the fees. Depends on market direction + traders losing trades.
I simply love this. It gives you the possibility to choose which side you are on. I like betting on GMX as you simply can’t lose with it. You earn 30% of the fees of every trade on the platform, regardless if the market is dumping or not. Regardless if traders are winning against the casino (GMX platform). And you are getting paid in ETH.
For the degens that want higher earnings, you simply bet on GLP. Downside is that if traders are winning against the platform or market is dumping, GLP value goes down. It’s a tradeoff but you can earn way more than GMX this way. Its a novel way of having a dual token system where real value is being accrued.
Stats
Total volume - 41 billion usd
There is a special website made on GMX about the statistics of the platform (https://stats.gmx.io/). Looking at it, it clearly shows that their volume is quite impressive. Since the launch in september 2021, they have managed to have a total volume of 41 billion (!!) usd. The ones who are familiar with the derivative markets, knows that this market is way bigger than the spot market. But in crypto, it always was difficult to have a decentralized protocol that managed to attract this type of volume we see in centralized perpetual exchanges like Bitmex, Binance and FTX. This is most likely because of the liquidity problem as these exchanges use traditional orderbooks and hire marketmakers to provide liquidity. Even dydx uses a traditional orderbook system. Decentralized perpetual protocols didn’t really have a solution for the liquidity but GMX seems to have found a solution with the introduction of GLP. Again, a novel and unique model that seems to be the missing link all along.
Fees - 54 million usd
This one is straightforward. 54 million usd has been paid to GMX/GLP holders since the launch. Which is not even 1 year old. What makes it even more impressive is that GMX is the 3rd biggest Dapp that is generating the most fees. And the number 1 dapp when it comes to actually paying those fees to tokenholders. Uniswap and Aave are useless governance tokens while GMX is actually paying all those fees to holders. A very big bullish case that is refreshing to see.
What should be mentioned as well is the fact that there is 0 VCs involved with this project. Even though VCs can add value to a project, most of the VCs in crypto are simply innit for the money. Like we all do. As I listened to the blueberry podcast , a GMX community podcast, I couldn’t agree more when they mentioned that most people think that big names VCs are good for investing purpose. But it’s not always true, actually, most of the time it’s not true. It’s usually a pvp style of game where VCs like to shill their bags so they can dump it for exit liquidity. I’m happy that for this reason there is no VC involved with GMX which makes big funds force to actually buy it on the market, just like us.
Another point I want to point out is also the amount of tokens that the team is holding itself. They own roughly 250k GMX which is very low compared to most teams in crypto where they sometimes own 40% of the total token supply. This reduces the chance that retail gets dumped on by the team. It’s a very interesting point as it shows how much the team behind GMX has conviction in their own product. It’s an ethos that you rarely see but again: builders keep building, even in the bearmarket. Aave used to that in 2018, now GMX is doing the same thing. Props to them.
Counterargument against ‘‘Real Yield’’
I was reading the other day an article from The Defiant about Real Yield. 0xSami, founder of Redacted Cartel, made some good counterarguments about Real Yield. I have worked and talked with Sami in the past and I can truly advocate that his opinions are high value. He made a good point by saying that:
As I think it’s true for most protocols trying to bandwagon on the ‘‘Real Yield’’ narrative, in the case of GMX: it’s irrelevant. The real yield is being paid by fees generated on the platform itself. There is no difficulty for retaining users or attracting it because derivative protocols that are truly functioning and scalable (L2) are simply rare.
This causes an effect of more users using the protocol —> generates more fees —> generates more Real Yield.
The closest competitor is Dydx but they are centralized in a way (right now), token holders get 0% of the fees and they are running on a L1 (right now).
Conclusion
Yes, I have invested in GMX. I started buying in early july of 2022. And I have decided to buy more during the recent dip. It’s one of the few projects where I believe that it’s going to be a multi billion dollar protocol in the next bullrun. It reminds me Aave in a way, where they used to be Ethlend in 2017 and managed to build this huge protocol with billions of TVL. GMX is going to have the same path imo. At a marketcap of barely 250 million, there is lots of growth left. Arbitrum is also the main smart money L2 as of writing right now. I’m not a big fan of optimism as it lacks good projects in their ecosystem. Smart money is in Arbitrum and I believe that smart money is also using the GMX platform. With Nitro going live soon and the Arbitrum token launch, I’m expecting a big pump in the ecosystem.
In that case, there is no doubt that GMX is going to blow up with it as well. It’s the number 1 dapp on Arbitrum, a nobrainer.
Ohh and: feel free to use my referral link if you liked my article :)
http://gmx.io/#/?ref=zoomeroracle
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