GMX is a modern decentralized exchange (DEX), offering its users an advanced platform for engaging in crypto trading, with leverage options extending up to 50x operating on the Arbitrum and Avalanche blockchains. Its decentralized framework ensures users maintain control over their funds, ushering in a new era of transparent trading operations.
In GMX V2, the exchange introduces a new approach to liquidity provision for leveraged traders, utilizing a suite of lending tokens called “GM tokens.” Each cryptocurrency listed for trading on GMX V2 is paired with a corresponding GM token. For example, traders taking leveraged positions in $SOL (Solana) are facilitated by the [SOL-USDC] GM, with Wrapped Solana and USDC supporting long and short positions, respectively. Holding GM tokens offers traders a balanced exposure to both the cryptocurrency and its stablecoin counterpart and are most impressive in their capacity to generate auto-compounding yield from the trading, lending, swap, and liquidation fees accrued on the GMX platform.
However, a challenge for investors lies in the constantly fluctuating yields generated by different GM tokens. This complicates the allocation strategy for yield maximization.
Introducing Gloop and GMI: Innovations in Yield Optimization
Gloop, a yield-optimizing protocol, created GMI to address these challenges. GMI enables investors to gain exposure to a diversified portfolio of GM assets through a single token. Unlike static allocation models, GMI dynamically adjusts its portfolio composition based on financial modeling, aiming to optimize returns and minimize risk by analyzing historical performance data to identify ideal asset allocations with superior sharpe ratios. Assuming a risk free rate of 5%, the initial target ratios give GMI a sharpe ratio of 3.57. To align with market trends and cycles, target ratio adjustments are planned to be conducted periodically.
GMI’s underlying assets stay near their target weights by implementing incentive mechanisms similar to GMX’s GLP token, where deposit fees are reduced for underweighted assets and withdrawal fees are reduced for assets exceeding their target allocations. The minimum fee is 0.33% and scales up to a maximum of 1.6%. Of the fees collected, 60% are added back to LP which essentially provides additional yield for GMI holders. The other 40% of fees are sent to a USDC pool to supplement lending liquidity.
Gloop plans to introduce a feature enabling users to borrow USDC against their GMI, a concept often described as ‘looping’ hence the name GLoop. This innovative feature promises to amplify the potential returns (or losses) on GMI holdings, adding another layer of strategy for more risk inclined gloopers.
The introduction of Gloop and GMI offer GMX users simple yet sophisticated tools for yield optimization and risk-adjusted investment strategies. As GMX continues to thrive, Gloop and GMI, empower users to improve their yield strategy.
GMI will be available in the coming days after the publication of this article, so don’t forget to turn on notifications on Gloop’s Discord & Twitter.
