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The automated market maker (AMM) model is the most popular liquidity-provision setup used by cryptocurrency exchanges. It solves the main limitations of the order book model, and has become ubiquitous in the crypto industry. Some exchange platforms are now exploring innovative ways to improve on the default AMM setup. GMX is one such project. The decentralized exchange (DEX) has employed a unique multi-asset liquidity model that’s an interesting modification to the default AMM.
GMX (GMX) is a decentralized spot- and perpetual-trading crypto exchange whose users can benefit from its low swap fees and zero price impact trades through leverage trading and market making. GMX uses Chainlink oracles to source dynamic pricing info from a variety of exchanges.
The exchange provides services on the Arbitrum Layer 2 protocol and the Avalanche (AVAX) blockchain. More than three-quarters of the trading activity transpires on Arbitrum, with Avalanche providing a much lower volume of trade.
GMX Trading Activity and Number of Users by Platform (from July 1, 2022 – September 1, 2022)
Opening and closing positions cost a fee of 0.1 percent each. If a swap is executed when opening or closing a position, a swap fee ranging from 0.2 percent to 0.8 percent of the collateral will be applied as well.
Another distinct feature of the platform is its multi-asset AMM model. Liquidity providers invest in on-platform index assets and, in exchange for the investment, receive GLP, the platform’s liquidity cryptocurrency. The index assets are based on a basket of assets used in swap and leverage trading on the platform.
A GLP token holder earns liquidity providers’ fees in the form of escrowed GMX rewards (esGMX) and 70 percent of the platform fees. The rewards will differ, depending on which network GLP is minted. On Arbitrum, the platform fees are distributed in ETH; on Avalanche, in AVAX.
For traders interested in leverage, GMX offers levels up to 30x. For example, if you provide collateral of 1 ETH, you can borrow up to 30 ETH for your leveraged trading. For long positions, the collateral needs to be in the cryptocurrency you want to borrow. For short positions, you can choose to make a collateral in any of the four stablecoins supported by the platform — Tether (USDT), USD Coin (USDC), DAI or FRAX.
The GMX token is used on the exchange for governance and staking purposes. Holders of the token can vote on a variety of proposals concerning the platform’s operations. The token can be staked on the exchange in return for three types of rewards:
The standard rewards on the platform include 30 percent of the exchange’s revenue from swaps and leveraged trading.
GMX has a maximum supply of 13.25 million tokens. Of this amount, close to 8 million GMX tokens have already been issued and represent the token's circulating supply.
Neither GMX tokens nor the platform’s other cryptocurrency, GLP, are used for transaction payments. These transactions are carried out in ETH and AVAX on Arbitrum and Avalanche, respectively.
GLP is used on the platform primarily for liquidity provision. In the exchange’s unique multi-asset AMM model (described above), GLP plays the key role. Liquidity providers are issued newly minted GLP when they invest in the multi-asset indices of the platform.
The investments provide the necessary liquidity to the exchange. When a liquidity provider decides to redeem their investment, their GLP is burned. Due to this demand-driven continual minting and burning, GLP’s supply fluctuates significantly. In essence, GLP is a synthetic asset that acts as a deposit certificate for liquidity providers’ investments.
The GMX token started trading in September 2021 at around $15. Soon after its launch, the token was caught up in the largest crypto market crash in recent times. Between November 10, 2021 (when the crypto market started falling precipitously) and mid-June 2022 (when the market finally managed to stabilize), the overall industry market cap dropped by 69 percent (from $3 trillion to $920 billion). Concurrently, GMX’s token price declined somewhat less severely by 58 percent (from $33 to $14).
The token recently received significant thumbs-up from investors and traders, with its value rising from around $14 in mid-June to to its current price of $47.80 on September 1 (the time of this writing) — an increase of 241 percent. For comparison, during the same period, the overall crypto market increased by 9 percent (from $920 billion to $1 trillion).
GMX token price, Sept. 2021 – Sept. 2022
Clearly, the market has a lot of faith in this token. The platform’s liquidity model and options for advanced traders are the key factors to this optimism. The exchange keeps innovating, with features such as X4 in the pipeline. X4 is an AMM pool concept that gives liquidity providers full control over how the pool and its options are structured.
Given the token’s recent rally and the strategy adopted by the platform, we believe GMX is among the best tokens for investment in the short- to medium-term future.
GMX tokens can be bought on DEXs, such as Uniswap (UNI) and Trader Joe (JOE), and on centralized exchanges (CEXs), such as Bybit and MEXC. Bybit is by far the largest and most well-known exchange platform for buying GMX tokens.
To buy GMX tokens on Bybit’s spot market, follow these simple steps:
Step 1: Create an account on Bybit and complete the registration process.
Step 2: Proceed to purchase USDT on the Buy Crypto page. Choose from the options available: Express, Fiat Deposit, Crypto Deposit and P2P Trading.
Step 3: Once you’ve purchased your USDT, navigate to the Trade tab and search for GMX/USDT.
Step 4: Click on Buy on the right side of the terminal to initiate trade. (***Note: You can choose from four types of orders: Limit Orders, Market Orders, Conditional Orders and Take Profit/Stop Loss (TP/SL) Orders.)
GMX employs an innovative approach to liquidity provision. It not only supports low swap fees, but it also features advanced options, such as perpetual trades, zero-impact trading and up to 30x leverage. All of these factors contribute to a sound outlook for the platform and its token. The token’s recent confident performance is further evidence of the exchange’s significant market potential.