September 4, 2022
GMX - 4 September 2022 - Dopex Community Token AnalysisCommunity-Analysis-Series
GMX - 4 September 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.
Dopex $GMX Hedge Strategy
Written by: DeFi-B
Quick Stats (as of 08/29/22)
- Price: $40.70
- Circulating Supply/Max Supply: 7,982,959/13,250,000
- Circulating Supply Valuation: $323,884,666
- Fully Diluted Valuation: $537,579,087
What we will cover today:
Introducing Dopex’s SSOV (Single-Staking-Option-Vault) enables liquidity providers ($GMX depositors) the ability to earn multiple layers of yield on their $GMX tokens
$GMX outperforms major bluechip $ETH in the most recent market crash
September option strategy
What is $GMX?:
$GMX is both a decentralized automated market maker (AMM) and decentralized perpetual spot exchange. AMMs are vital pieces of decentralized exchanges of all types and are meant to remove any intermediary in the exchange of crypto assets. Simply, it is a smart contract that executes and automates the process of providing liquidity. At the moment, the list of swappable tokens is fairly limited and under ten total (including $wBTC, $ETH, and many stable coins). $GMX is not only an AMM but also a perpetual spot exchange, that allows traders to speculate on the future price movement of cryptocurrencies while operating on the second-layer Arbitrum chain, which is great if you are trying to avoid high transaction fees from Ethereum mainnet. When using the $GMX platform to speculate on future price movement, traders have the ability to utilize extreme leverage (up to 30x - while increasing your liquidation price). The platform not only supports long positions but also enables traders to short a token with leveraged exposure. Swap fees on $GMX are extremely low (0.26%) when compared to that of $UNI/$SUSHI (0.60%) and that is just based on the design of the protocol which I will get into later. You should consider swapping on the $GMX platform if you are making sizable trades on the Arbitrum network
Why so bullish on $GMX?:
I’ve got to start with this as I haven’t seen more than a handful of people bring up this extremely bullish point. $GMX outperformed $ETH in the most recent market crash. How much so? Let’s take a look. From April 1st through July 1st $GMX saw a drop in value of 62.64% while $ETH saw a drop in value at 69.05%. Furthermore, since July 1st to the current date $GMX has seen an increase of 157.76% while $ETH has experienced growth of 38.02% over the same period of time. You’ve heard people say, “the trash burns” during these downturns in the market. This is a very telling signal. Obviously such growth can be attributed to the respective market caps but you also have to understand the amount of revenue that $GMX is producing compared to that small market cap. If you take a look at platform fees you will see they have accumulated over $1.7 million in platform fees in less than seven days. That is more than 0.5% of the total market cap being generated from platform users in less than one week. WHAT!?
September Options Strategy:
Dopex offers both calls and puts on ten different coins across three different chains. However, since September calls have not yet been written, we will focus on what is available to use in this situation - puts. Taking a look at how previous sellers of $GMX puts have fared we see there is not tremendous volume and thus see this opportunity as a chance to hedge our current $GMX holdings with straight put purchases. Looking at the $GMX chart it can be identified that the coin is susceptible to extreme swings in both directions (likely due to its microcap nature) and thus look for resistance points. Within the past 30 days, three points can be identified at $23, $33, and $36.
As can be seen on the official Dopex.io trading platform the current strike prices for weekly $GMX puts are shown below ($20, $24, $28, & $32). Looking at the breakeven of the $32 strike we see a premium of only $1 to break-even and thus see this option as an extremely attractive hedge position for $GMX longs. The risk of such a strategy is simply the initial investment of the options (premium) themselves.
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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