GMX announces the launch of Single-Token Pools on V2, starting with yield-earning BTC and ETH liquidity pools on Arbitrum
the next step in the evolution of GM Markets
Following the successful launch of 15 isolated synthetic and natively-backed markets based on the GMX V2 Dual-Token standard, GMX is now introducing complementary Single-Token Pools for BTC and ETH backed by WBTC and ETH respectively. These new GMX V2 markets allow liquidity providers to earn fees from supporting trading while maintaining BTC or ETH exposure, and provide integrations with a composable highly correlated yield-generating product.
The core contracts of GMX V2 can support trading markets for a wide variety of assets, market structures, and collateral types. The first iteration of GMX V2 deployed the main trading pairs as backed markets (gmBTC, gmETH, gmSOL, etc.), and started efforts on synthetic / partially backed trading pairs (gmDOGE, gmNEAR, gmXRP, etc.).
Now is the time to take the next step and introduce 100% BTC and ETH pools, which will help draw in additional liquidity to further scale capacity for GMX’s trading markets.
GM Markets: roll-out success
The initial launch and controlled scaling of the GM liquidity pools allowed for the continued refinement of market parameters. This included the implementation of dynamic funding fees that have helped to ensure balanced pools, and the continued onboarding of traders (including institutional ones) who are incentivized to balance pools, through earning funding rates, paying lower trading fees and collecting price impact rebates.
Fully backed and synthetic V2 markets have prospered, growing to USD 300M in Total Value Locked (TVL). They consistently maintain daily Open Interest of USD 100-250M and a healthy Long/Short balance. New markets were recently introduced, for assets such as NEAR, ATOM, AVAX, AAVE, BNB and OP, and have also attracted healthy liquidity and trading activity.
The resilience of these V2 markets and the system's stress-testing over the last six months create a strong foundation for introducing single-token-backed markets to support the scaling of GMX.
GMX focuses on creating equitable markets that allow all liquidity providers to share in the fees from the liquid markets they support. Now, liquidity providers will have more options for doing so, while maintaining varied exposure to certain assets.
GM Markets: the next evolution
The first single-token-backed markets to launch on Arbitrum will be:
gmBTC (WBTC): A pure BTC pool for the BTC/USD market, backed by [WBTC/WBTC] as the Long and Short token.
gmETH (ETH): A pure ETH pool for the ETH/USD market, backed by [ETH/ETH] as the Long and Short token.
These new GM markets will allow GMX to unlock greater market liquidity. They will help attract a new set of liquidity providers looking to have 100% exposure to a single underlying collateral (BTC, ETH, Stablecoins, or Altcoins), without the rebalancing that occurs in existing GM markets, GLP, and liquidity pools in general.
The introduction of Single Token Markets has the potential to unlock a significant portion of the over 35 Billion TVL spread across lending markets. Given their high correlation, they will also open up new collateral options for GM tokens within such lending markets.
For context, see the recent announcement by Solv, one of the largest liquidity providers to GMX’s GM markets, on the development of its BTC-focused yield vaults. This aligns with the general trend toward single-token yield-generating vaults. These new markets have the potential to provide GMX’s wide ecosystem of vault builders with an additional set of high-quality, composable assets to leverage in their strategies. (These assets are complementary and not competitive with the effort of those creating various delta-neutral strategies.)
Single-Token GM Markets: the Details
Like the existing GM pools based on the Dual-Token Standard (Token/USDC), the Single-Token GM pools:
are exposed to trader PnL, as long as the pool isn't 50/50 balanced between Longs/Shorts.
earn fees from the pool at the listed APR rate. These fees are auto-compounded, automatically increasing the price of your GM tokens.
are exposed to the price movements of the underlying asset.
It is important to understand, however, that Single-Token Markets carry a different risk profile. Contrary to the Dual-Token GM pools, there is no stablecoin element: the volatile token (BTC or ETH) is used to back both Long and Short positions. Like synthetic markets and markets on centralised exchanges, certain scenarios could result in auto-deleveraging of trader positions if markets are not well-balanced and profits grow outsized. This could have a negative impact on the user experience.
Initially, the new gmBTC (WBTC) and gmETH (ETH) markets will have lower trading caps relative to capital, reducing the risk profile for Liquidity Providers at the cost of some yield-earning capacity. Refer to this Governance forum thread for the initial launch parameters recommended by security partner Chaos Labs.
Products like gmBTC (WBTC) and gmETH (ETH) are not ‘up only’. They are effectively vaults that have full exposure to the markets. This means that while they earn yield, they can experience capital drawdowns if trader PnL turns in the favor of traders.
Note that the new gmBTC (WBTC) pool will be complementary to the existing gmBTC (USDC/WBTC) pool. Similarly, the gmETH (ETH) pool will complement the existing gmETH (USDC/ETH) pool.
While these pools will compete for volume with the other pools for the same asset, this inter-pool competition will not affect traders. User prompts will highlight the best market option for trade execution. And, in time, the development of an aggregator service for traders will be feasible.
Assuming these new single-token markets perform well, it opens up the interesting possibility of other single-token markets – including stablecoin, yielding stablecoin, LSTs, GMX tokens, and other volatile assets – to back markets on GMX v2.
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Disclaimer
This announcement is for informational purposes only and does not constitute legal, financial, or investment advice. GMX or any other parties make no warranties or representations regarding the accuracy, completeness, or suitability of the information presented and will not be liable for any losses, damages, or adverse consequences that may arise in relation to this announcement.
It is strongly advised to undertake your own due diligence and seek advice from relevant professionals before making decisions based on this announcement.