GMX Users Increase, King Dollar, HOPping Thru L2s

MAY 23, 2022 • 5 Min Read

Joo Kian + 3 others CeterisAshwath BalakrishnanJason Pagoulatos Joo Kian
Disclosure: Delphi Ventures has invested in Pyth, LUNA, SOL, and AVAX. Members of our team are also

Chart of The Day: GMX Users Increase Through Integrations 

  • GMX is a DEX and margin trading platform that utilizes an oracle pricing model to allow for optimal on-chain execution of trades.
  • Arbitrum users have been growing rapidly since the integrations on multiple DEX aggregators like 1inch and Paraswap. This grew DAU to around 600-1400. However, the increase in userbase isn’t reflected in its volume as swaps continue to hold 3-9% of daily volume on GMX.
  • June is looking bright for GMX as there will be integrations of a delta-neutral USDC vault by Umami Finance done through hedging of GLP. Moreover, GMX has partnered with Rook, allowing them to arbitrage between GLP and other DEXs. 80% of profits from the arbitrage will be directed to GMX and split between GLP and GMX holders.
  • For more, Delphi members can see our Pro Report on GMX here.

Revenge Of The Greenback

[Excerpt from a Delphi Insights Report]

  • It should come as no surprise that the Dollar Index (DXY) appears in our Market Insights report once again; dollar strength has been one of the most important macro factors driving asset prices over the last 6 months, alongside inflation and geopolitical uncertainties (to name a few).
  • Aside from the last 7 days (during which the DXY has decided to take a breather), it has been truly “UpOnly” for the greenback. DXY was 95 when the 2022 calendar year began. It has since risen to roughly 103, notching an 8.5% gain YTD. This move has also been the fastest YoY change in many years, leading to the DXY breaking out of its 7 year range.
  • This DXY strength has been a consistent drag to risk asset performances over this same time period, as discussed in our previous market notes.
  • For more, Delphi members can see the full Market Insights here.

Hop Protocol – A Hare, or a Tortoise?

[Excerpt from a Delphi Pro Report]

  • Rollups allow Ethereum to scale by moving the execution of transactions to a separate chain and then batching them together to post to the L1 (Ethereum). One notable tradeoff here is liquidity fragmentation; when all activity is on a single layer there is one representation of each asset and all protocols can make use of the same tokens. You lose this when having separate layers. For example, while Optimism and Arbitrum both roll-up to Ethereum, their representations of the native asset ETH are not entirely fungible. When users deposit to Optimism they are using oETH, Optimism’s canonical representation of ETH, and when moving to Arbitrum, aETH. While both of these are backed by ETH they are not 100% fungible, and for a user on Arbitrum who wants to use their ETH on Optimism they will need to exit to the layer 1 before sending back through Optimism’s native bridge.

  • So herein lies the problem. You can send ETH back through the bridge and wait 7 days to use another rollup, or you could wrap and bridge the Optimism version of ETH to Arbitrum, which would have a different risk profile from ETH on Arbitrum and lose out on composability within the Arbitrum ecosystem. oETH on Arbitrum would not be fungible with the canonical version of ETH on Arbitrum (aETH) meaning that people using this version on Arbitrum would be taking on idiosyncratic risks that aETH would not have (Optimism risk and bridge risk). Such fragmentation is also highly unpleasant from a UI/UX perspective both for app developers and users. Obviously, neither of these solutions is viable.

A Year of Hopping

  • It has been about a year since the Hop protocol launched, originally on the PoS sidechains xDAI and Polygon, and later in the year on the L2’s Arbitrum and Optimism. Usage did not start to spike until the L2’s became more used. Since Polygon and xDAI are sidechains and thus not subject to the same exit times as optimistic rollups, there was not a critical need for Hop; this changed with the L2’s.

  • Looking at the monthly volume, Fall of 2021 is when Hop went from doing less than $50M/month to what is now consistently in the $250-300M range. It’s done >$2B of volume since inception, hitting the first billion in January and the second in early May. As we see below, this directly correlates with the L2 launches.
  • For more, Delphi members can see the full Pro Report here.

Notable Tweets

rETH Risk Assessment by MakerDAO

Protocols Utilizing Pyth

OKX Supports More USDC Pairings

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Joo Kian + 3 others CeterisAshwath BalakrishnanJason Pagoulatos Joo Kian