The Development Status of GMX under the Arbitrum STI Program

Recently, GMX received an allocation of 12 million ARB tokens from the Arbitrum Short-Term Incentive Program (STIP), which is the largest single reward in the Arbitrum ecosystem. GMX stated that it will use these funds to support the joint development of its V2 version and the Arbitrum DeFi ecosystem. Since the launch on November 8, nearly 10 days have passed. Let's take a look at how these funds are being used and whether they have helped GMX achieve the expected growth.

ARB token is mainly used to incentivize GMX V2

The 12 million ARB tokens allocated to GMX under the STIP plan will be gradually distributed over 12 weeks, with one period per week. This funding is mainly used for the following aspects:

1. Incentivize GMX V2 perpetual contract and spot liquidity providers
2. Encourage liquidity to move from the GLP pool of GMX V1 to the GM pool of V2
3. Subsidize GMX transaction fees, reducing them to an average of 0.02%
4. Sponsor projects developed on GMX V2

Through these measures, GMX aims to enhance its competitiveness while attracting more traders and liquidity providers.

GMX V2 Liquidity Growth Significant but Growth Rate Slows Down

As of November 17, the GMX Arbitrum incentive program has been implemented for nearly 10 days, and the ARB rewards for the first week have been distributed via airdrop. During this period, how has GMX performed overall?

• The total liquidity of GMX V1 and V2 increased from $496 million on November 8 to $528 million on November 17, an increase of 6.45%.
• The liquidity of GMX V1 has decreased from $400 million to $364 million, a drop of 9%.
• The liquidity of GMX V2 increased from 96.77 million USD to 164 million USD, a growth of 69.5%.

Although the overall liquidity growth of GMX V1+V2 is limited, the significant growth of V2 is still important for GMX because V2 has higher capital efficiency. However, it is worth noting that the growth of V2 liquidity is mainly concentrated on the first day of the incentive program launch, after which the growth rate has noticeably slowed down.

In terms of open interest, it increased from 152 million USD on November 8 to 182 million USD on November 13, but dropped to 137 million USD by the 17th, even below the level before the incentives started.

The trading volume has fluctuated significantly and is closely related to market conditions. It reached a peak of $555 million on November 9 and was $365 million on November 16. Currently, the trading volume of V1 is still higher than that of V2.

The issue of imbalance in long and short positions in the GM pool still needs to be resolved

GMX V1 has always had a serious imbalance in the long-short ratio. As of November 17, the long open positions of V1 amounted to $19.26 million, while the short positions were only $687,000, with a discrepancy close to 30 times.

GMX V2 hopes to attract arbitrageurs and balance long and short positions through fee adjustments, but the effect has not yet fully manifested. In V2, the total long open interest is $51.66 million, while the short position is $28.67 million, indicating a significant gap.

In the GM pool for certain assets like SOL, DOGE, and XRP, long positions have reached their limits, with a clear imbalance between long and short ratios. Taking XRP as an example, long positions are 4.42 times that of shorts; for SOL, long positions are twice that of shorts.

Although GMX V2 offers higher funding fee returns for short sellers, the goal of balancing longs and shorts has not yet been achieved due to various influencing factors. For liquidity providers, there remains a high risk when the long-short ratio is imbalanced and market volatility is significant.

Conclusion

The Arbitrum incentive program has indeed helped GMX V2 achieve significant liquidity growth, but the momentum seems to have weakened. The open interest and trading volume have not shown obvious increases, possibly influenced more by market factors. At the same time, the GM pool of GMX V2 still faces challenges with an imbalance in long and short ratios, especially with some volatile altcoin trading pairs, which may pose higher risks for liquidity providers. How GMX continues to attract users and address these issues in the future is worth ongoing attention.