Could @GMX_IO collapse in a bull market?
In this 🧵👇we will walk you through:
how an imbalance between longs/shorts in a bull market will reduce GLP returns, decrease GLP AUM and liquidity, and trigger a death spiral.
#CryptoResearch
2/
In a bull market, GMX shorts not only do not receive funding fees but also have to pay borrowing fees.
As a result, GMX will be 95%+ long in a bull, as evidenced by OI between 2021-9-1 and 2021-11-10.
3/
GLP was losing money to traders during that period as well.
Traders made a profit of ~$5 million.
4/
We calculated GLP adjusted returns by subtracting (or adding) trader PnL to fees.
5/
GLP's adjusted APR was lower during the bull because traders were winning and higher during the bear because traders were losing.
GLP adjusted APR averaged ~50%.
6/
The sharp decreases in GLP were triggered by events rather than fluctuations in APR, resulting in a positive flywheel that stabilized GLP supply.
Market-wide crypto FUD ➡️ more GLP redeem & more traders & high fees ➡️ high GLP APR ➡️ more GLP mint
7/ Conclusion
The so-called GMX bull market death spiral is not valid.
GLP prints money even if all traders are long and winning in a bull market. GLP-based vaults now also hedge these risks, such as
@rage_trade, @GMDprotocol, etc.
8/
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Read the full article at:
tokeninsight.com/en/research/an….
The author: @quantumzebra123
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