March 17, 2022

GMX - 17 March 2022 - Dopex Community Token Analysis

GMX - 17 March 2022
The Dopex Community Analyst series is a series of strategies, ideas, opinion pieces and educational resource written by independent contributors from the Dopex community. Every month many knowledgeable community analysts share a short analyses of a coin of their choice and share these with Dopex. The goal of these articles is to empower the community and help Dopex increase SSOV volume & deposits. With these articles we hope to provide users with additional information that will help them in making an informed choice of strategy using our products.
Without further ado let’s jump into our next article.
Protocol concept
GMX is the dominant decentralised perpetual AMM on Arbitrum and Avalanche. Traders can trade 5 risk assets (BTC, ETH, LINK, UNI and AVAX) on GMX. Instead of using liquidity providers for each asset pair like in a traditional AMM, liquidity providers deposit one of the tradable risk assets into GMX and mint GLP tokens which represents an ownership of the overall LP for GMX across all assets.
Competitive landscape
Perpetual futures is a growing asset class that is particularly popular in crypto as a convenient instrument to take both leveraged long and short positions. This asset class was previously dominated by CEXs which typically offered high leverage of up to 100x. Decentralised on-chain perpetual AMMs started to launch in the DEFI summer and major players include DYDX, PERP and GMX. Each L1 tends to have a dominant perpetual AMM with PERP dominating Optimism, DYDX on Starkware and GMX on both Arbitrum and Avalanche. The following table shows the distinctive features of each protocol.
Killer features
  • Up to 30x leverage where other protocols only offered up to 20x leverage depending on asset.
  • No slippage trading through the use of Chainlink price feeds as well as GLP liquidity model.
  • Best liquidity using order book model
  • Most number of tradable risk assets (28)
  • Flexible vAMM construct which allows LPs to take leverage when providing liquidity.
Fundamental investment thesis
Best trading experience:
  • Trading on GMX has 0 slippage which is a unique feature within decentralised perpetual AMMs. As such, there are infrequent long wicks which minimises liquidation risks for traders due to inferior price discovery.
    • Achieved through using Chainlink price feed to determine asset prices, trades on GMX are executed OTC at the given price against GLP.
  • Maximum leverage of 30x is the highest amongst decentralised perpetual AMMs which brings GMX closer in line with leverage levels offered by CEXs.
Significant volume and fee growth:
  • Despite the general reduction in DEFI activity across the board, trading volume on GMX has been increasing
  • The steadily increasing trading volumes on GMX has consequently translated to higher fee generation for GMX.
    • custom
**GLP tokenomics help to align interest with liquidity providers:
  • GMX requires increasing supply of liquidity to scale trading volumes. 70% of GMX fees are distributed to GLP holders (in ETH for Arbitrum and AVAX for Avalanche) which is generous enough to incentivise constant growth in GLP AUM (despite general downward trend of asset prices since Dec 2021).
Fundamental valuation**
GMX is arguably undervalued on a fundamental basis at FDV / revenue of 7.2x, especially considering its stellar growth.
GMX can be staked to earn 1) trading fees in the form of ETH / AVAX and 2) staking rewards in the form of escrowed GMX. esGMX will be vested linearly over 1 year into GMX. Current staking reward on Arbitrum is 35.2% APR, decomposed into 17.2% in ETH and 17.8% in esGMX.
Staking GLP earns 57.9% APR, decomposed into 38.3% in ETH and 19.5% in esGMX.
Investment strategy
While GMX has seen tremendous fundamental growth since 3Q 2021 with volume and fee generation defying the general bearish trend within other DEFI protocols / verticals, its token price has been sluggish along with the broader market. The following are options you can take depending on your investment time frame and view of the current market.
Strategy 1: Short term bearish on overall market, long term bullish on GMX
Long GMX, deposit into GMX Call SSOV on Dopex to earn call option premiums.
  • Buy GMX on Uniswap on Arbitrum
  • Deposit GMX into GMX Call SSOV on Dopex
    • custom
    • Farm APY on the landing page only includes the base staking rewards.
    • custom
    • Select strikes where you want to write call options for.
    • As a call option writer, you have the obligation to sell GMX at the strike price.
      • For example: Sell call options at strike = $25.
        • Scenario 1: GMX price at end of the epoch (end of month) = $24. Profits from this strategy = Farm rewards + premiums from call options
        • Scenario 2: GMX price at end of epoch = $26. Profits = Farm rewards + premium from call options - loss from call exercise ($1 for every GMX option written).
    • GMX Call SSOV tend to have high utilisation with high IV which earned option writers high premiums.
Strategy 2: Short term bullish on overall market, neutral on GMX token price, want to accumulate majors only
Deposit into GLP, use ETH rewards to buy call options on ETH on Dopex.
  • Deposit assets on GMX into the GLP pool to mint GLP tokens. GLP is not a tradable token and cannot be bought / sold on the open market.
    • custom
    • Assets that can be used for deposit include BTC, ETH, LINK, UNI, USDC, USDT, MIM, FRAX and DAI.
    • GLP can be burnt to redeem any of the above assets as well.
  • Accumulate rewards in both esGMX and ETH. ETH rewards can then be used to buy ETH calls on Dopex.
    • Select strikes where you want to buy call options for.
    • As a call option buyer, you have the option to buy ETH at the strike price.
      • For example: Buy call options at strike = $2500.
        • Scenario 1: ETH price at end of the epoch (end of month) = $2501. Profits from this strategy = Profit from call exercise ($1 for every ETH option bought) - call premium.
        • Scenario 2: ETH price at end of epoch = $2499. Profits = 0 - call premium.
Author has no position in GMX / GLP and would like to add some at some point in time. Author has a spot position in DPX.
Views expressed in this article are the author’s own and not reflective of the position or professional views from
Dopex reimburses analyst contributors with a small payout to partially compensate the time spent on research and writing. For questions feel free to jump into our discord ( and chat with the team or analyst contributors directly.

About Dopex

Dopex is a decentralized options protocol that aims to maximize liquidity, minimize losses for option writers and maximize gains for option buyers — all in a passive manner. Dopex uses option pools to allow anyone to earn a yield passively. Offering value to both option sellers and buyers by ensuring fair and optimized option prices across all strike prices and expiries. This is thanks to our own innovative and state-of-the-art option pricing model that replicates volatility smiles.

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