GMX LP (Avalanche)
GLP is the liquidity provider token for the GMX protocol that allows traders to long or short crypto assets with leverage. It is composed of a basket of crypto assets including BTC, ETH and stablecoins. GLP floats freely based on the value of the underlying basket of assets and serves as the counterparty for traders' wins and losses.
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GLP is a low-cap asset that represents the blockchain`s native currency or monetary fee used to execute transactions on the network. This asset is exposed to the underlying risks of GMX and Avalanche bridge, which are protocols both rated as Watch out.
GLP has an uncapped supply but has inflation control or burn mechanisms in place. GLP is the token received for providing liquidity to the GMX protocol and receives 70% of platform fees paid in ETH. GLP consists of a basket of crypto assets including BTC, ETH and stablecoins. The price of GLP floats freely based on the value of its underlying assets. In addition, when traders on GMX earn a profit or loss, that amount is added to or removed from GLP as the pool represents the counterparty for those trades. GLP is essentially an index of major crypto assets, including BTC, ETH and stablecoins. Therefore, it is exposed to the price action of all the underlying assets.
GLP is moderately correlated to the overall market. GLP is essentially an index of major crypto assets, including BTC, ETH and stablecoins. Therefore, it is exposed to the price action of all the underlying assets.
What is GLP used for?
GLP is the GMX liquidity provider token that consists of a basket of crypto assets used for swaps and leverage trading. GLP can be minted with any index asset or burnt to redeem any index asset. GLP holders essentially rent out the upside of the underlying assets to traders. In exchange, GLP holders receive the majority of protocol revenue paid in ETH or AVAX, as well as vested GMX rewards (esGMX).
GLP tokenomics
GLP does not have a supply cap as it can always be minted with any of the underlying assets. The basket of assets includes a mix of crypto assets (i.e. BTC, ETH and AVAX) and stablecoins (i.e. USDC). Each asset has a target weight that is set by the protocol; as such, LPs are not equally exposed to all the crypto assets given the different asset weights and utilization for each asset can vary. GLP assets are those that liquidity providers (LPs) are interested in having price exposure to, and those that traders are interested in trading short-term. Therefore, the greater the asset mix, the higher the liquidity and utilization rate (trading volume) of GLP. GMX requires all assets to have Chainlink price feeds with high trading volume and liquidity across several exchanges. GLP rebalances passively once per week by updating asset prices to calculate new target weights. Minting and redemption fees for GLP and swap fees are dynamically adjusted to incentivize LPs and traders to push the actual asset weights towards the target weights.
How does GLP accrue value?
GLP holders earn 70% of all platform fees paid in AVAX and esGMX. GMX charges a 0.1% fee for opening and closing positions plus a dynamic borrowing fee based on utilization rates and the underlying asset you choose to profit in. Swap fees are also dynamic and based on whether a swap improves the weights of assets in the GLP pool towards or away from the target allocations. Minting and redeeming of GLP similarly incurs a dynamic fee based on whether the selected asset is currently over or under-weight. As GLP effectively rents out crypto exposure to traders (by always taking the other side of the leverage trade), holders profit whenever traders lose money.
