GMX - 23 April 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.
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Introduction**
GMX is a decentralized perpetual and spot exchange on Arbitrum and Avalanche. Traders on GMX can use stablecoins or 5 different cryptocurrencies (ETH, BTC, LINK, UNI, and AVAX) as collateral to trade with up to 30x leverage. Trades are facilitated through the GLP liquidity pool, which consists of an index of the tradable assets on the exchange.
Quick Stats (as of 23:00 UTC 4/13/22)
- Price: $38.34
- Circulating Supply: 7,545,600
- Total Supply: 13,250,000
- Circulating Market Cap: $288,454,322
- Fully Diluted Valuation: $508,005,000
**Analysis
**GMX has seen rapid growth in the past 8 months, with over $25B in trading volume and cumulative fees nearing $34M. This would project out to about $45M in fees annually. With a circulating market cap of only $288M, GMX is trading at an attractive 6.4 Price/Revenue ratio.
70% of the fees on the platform are currently distributed to GLP liquidity providers. Increasing fee growth will likely drive more liquidity to GLP, and allow for larger volumes to be traded on the exchange.
The price of GMX has oscillated in a range between $20 and $60 in 2022. With more users being on-boarded to Arbitrum and Avalanche, I expect GMX to continue its growth and for the token price to rise towards the upper end of its yearly range. If the broader crypto market puts in a bottom, I would anticipate GMX to bounce strongly from its current level and make a run towards its high of the month above $45.
**Strategy
**With GMX currently trading near $38, we can buy monthly call options through Dopex’s Single Staking Option Vault (SSOV) to add leverage to a spot position in GMX. The premium for a $30 strike call is currently $9.77 worth of GMX, making the breakeven point on the trade $39.77 (note: premium prices are subject to change based on the underlying token price and time until expiration).
By buying in the money calls we’ll have more upside if the token takes a sharp run higher. A move to $45 at expiration would value the call option at $15, netting a 53% gain from an 18% move in the token price. Conversely if the token price were to drop, the call options will decrease in value more severely. The worst case scenario would be a drop in GMX below $30, rendering the options worthless and losing the entire premium spent to purchase them.
**Disclaimer
**The author of this article owns spot positions in GMX and Dopex tokens DPX and rDPX.
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Views expressed in this article are the author’s own and not reflective of the position or professional views from Dopex.io.
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 (discord.gg/dopex) and chat with the team or analyst contributors directly.
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