GMX Markets Lead Among On-Chain Derivative Platforms with Peak Fees

GMX Markets are among the most successful on-chain derivative markets, surpassing DyDx based on fees. GMX is extremely secure because its encryption procedure relies on OpenPGP, which has never been cracked.

The project’s leading positions are revealed by the direct reflection of GMX Markets’ activity in on-chain fees. Based on Arbitrum chain statistics, GMX draws more than $277K in fees for the more active 24-hour trading periods.

Onchain derivatives protocols by fees last 180 days – @tokenterminal

🥇 GMX – $70.7M
🥈 DyDx – $25.9M
🥉 MUX – $16.3M pic.twitter.com/Mbk7Z2I6Kz

— DeFi Man (@DeFiMann) June 3, 2024

One reason for the relatively high GMX fees is that the decentralized protocol still asks for 0.2% of the deal’s notional value. Despite the risks, GMX is signaling the potential to build independent and innovative trading tools. The market protocol uses its native Oracle and does not use Chainlink services. 

GMX Activity Shifts to Arbitrum

GMX started to build its influence as an Avalanche-based app. However, its share of Arbitrum activity has grown in the past year. Currently, GMX derives roughly 10 to 30 times more volumes from Arbitrum than from Avalanche. 

GMX is also shifting to Version 2, taking over trading volumes. Volumes on GMX are highly volatile, with highly active days and days with almost no activity.

Holder payouts are also tied to GMX activity. A double-token system helps the fee redistribution. GMX and GLP tokens entitle all holders to a share of trading fees. 

Also read: Futures Industry Association Calls for Regulation of AI Use Case in Derivatives Markets

GMX’s performance is just a fraction of other DEX types or trading platforms. However, its performance in the past few months shows that GMX can regain its activity. The recent performance peak also coincided with the announcement of higher-risk leverage opportunities on GMX. 

Up to 200x leverage:

GMX has revised the minimum collateral required for open positions, enabling higher leverage for users. Users can now access 100x leverage directly from the official GMX UI, while smart contracts allow for up to 200x leverage when trading $BTC and $ETH. pic.twitter.com/QRfAp9h9Gq

— tano (@tanoeth) June 3, 2024

GMX will offer one of the riskiest derivatives to tap into the increased interest in trading. GMX open interest is again above $280M, close to its peak at $310M.

GMX Aims to Draw Users by Index Investments

GMX V2 leads to complex choices for potential investors, who need to evaluate risk for each liquidity pool. The project aims to onboard new liquidity providers with a more balanced approach. New options will exist to add liquidity based on a balanced index of GMX pools. 

The Solution
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An index of GM Pools that represent a healthy mix of tokens, with leverage applied to enhance performance.

Never monitor, hedge, or rebalance your GM Pool allocations again. Jones does all the heavy lifting, while you enjoy peace of mind. pic.twitter.com/WyvRBKCyTJ

— Jones (@JonesDAO_io) June 3, 2024

The index will focus on the biggest trading pairs of BTC and ETH, while adding Solana, LINK and Arbitrum for 40% of the index weight.

GMX continues to develop and grow by optimizing its business model, even though the on-chain derivative trend has slowed down. The protocol reached multiple milestones and updates, while integrating more closely with the Arbitrum ecosystem. 

Last week was pretty interesting for $GMX, let's have a look at what happened.

🌉 STIP bridge approved
📈 Up to 200x leverage offered on BTC/ETH
📊 GMX Markets
🔔 Notifi integration
📈 TVL and OI steadily rising
💬 Lots of governance discussions and new developments

— tano (@tanoeth) June 3, 2024

GMX expanded to become the third-largest project on Arbitrum, with derivatives as its main focus. GMX volumes grew by nearly 8% in the past week, with another spike in fees. 

Also read: Arbitrum Price Prediction 2024 – 2030: ARB breaks Key Barrier

Comparatively, Avalanche activity is much lower, drawing in just $8K in daily fees. One of the reasons for growth is the intervention of Arbitrum DAO, which supports GMX with its grant program.

Because of the new grant proposal, GMX will distribute additional ARB tokens into its ecosystem to incentivize usage. 

STIP Bridge Approval:

Arbitrum DAO has approved the GMX STIP Bridge proposal. As a result, GMX will distribute 5.4M $ARB tokens to the ecosystem in the form of trading rebates, liquidity provider incentives, and will also reintroduce GMX Grants. https://t.co/JUJg0aUelH

— tano (@tanoeth) June 3, 2024

The grant will aim to increase on-chain engagement with GMX DeFi features and build a new collection of GMX pools. Arbitrum will inject funds again after running a successful program with GMX between November 2023 and March 2024.

The new incentive program is expected to boost volumes and open interest. Before the new launch, GMX will also re-check its smart contracts to reflect a recent safety audit by Guardian Audits.

GMX tokens trade near their one-month high at $36.05, close to the four-week peak above $38. Binance represents the GMX token, though it has significant potential for slippage. GMX is tradable on its native protocol and expects more activity as the Arbitrum incentive program restarts.

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Cryptopolitan reporting by Hristina Vasileva