Trade Perpetuals on GMX

In our previous DeFi discussion, we explored ETH staking on Lido via Nash Wallet to generate yield. Now, let's dive into DeFi derivatives and more advanced investment strategies. In this article we are going to take a closer look at one of the most popular derivatives - perpetuals, while in the next post we will discuss options trading.

What is GMX?

While Nash doesn't directly provide leverage trading or ability to trade perpetuals, its flexibility allows it to integrate with various platforms. Consider Nash Fiat Ramp as your gateway to DeFi, and Nash Wallet as the hub of your DeFi journey. What Nash can't provide directly, it bridges. While there are many platforms out there providing similar features, we want to discuss the integration on GMX.

GMX is an innovative platform for spot and perpetual trading. It first emerged on Arbitrum then later expanded to Avalanche. It made waves by enabling traders to utilize up to 50X leverage, establishing itself as a pioneering fully decentralized high-leverage trading platform. GMX boasts commendable tokenomics, with both GLP and GMX tokens, and offers a lucrative reward system for traders and liquidity providers. Notably, it's inspired numerous forks over the past year and has just released a V2 version of its trading platform.

Understanding Futures, Perpetuals, and Leverage

Before engaging with GMX, it's crucial to grasp the basics of futures trading and leverage:

• Spot vs. Futures Trading: Spot trading entails purchasing a crypto asset with the intent of selling at a profit later. Futures trading is more speculative, and is about predicting future price movements. With futures, traders either "go long" (predicting a price rise) or "go short" (anticipating a drop), backing their stance with collateral.
• Profit and Loss Dynamics: If the asset value increases, long traders profit, while short traders incur losses, and vice versa.
• Perpetual Contracts on GMX: Unlike traditional types of futures contracts with set expiration dates, perpetual contracts lack an expiry date. Meaning traders can maintain their position indefinitely or choose to close it at any time. However, profits or losses continue to accumulate until the trade is closed or the account is liquidated due to excessive losses.
• Leverage: Leverage empowers traders to amplify their bets beyond their collateral. For instance, with 10X leverage, a trader could place a $100 bet on ETH with just $10. This is achieved by borrowing from a specific pool, like the GLP pool in the GMX ecosystem, represented as the GLP token.

GMX and GLP/GM Tokens 

GMX token is the primary utility and governance token. Stakers of GMX earn 30% of the platform's trading fees (distributed pro-rata among token holders), payable in either ETH or AVAX. 

In GMX V1 the pool token is called GLP and it represents the tokenized assets from all trading pairs. All trading assets are pooled into a single token with targeted weights. GLP token holders earn 70% of GMX V1 fees but also assume a trading risk. To explain this a bit further, Liquidity Providers in GMX actually borrow funds to traders that are using leverage - if traders get it right, LPs loose. Same goes for vice versa.
In GMX V2, there is no longer a single GLP token. There is, rather, a GM token for each trading pair (for example GM token for only ETH-USDC). The fees from each trading pair are therefore associated with its GM token.This change from the way V1 LP token (GLP) worked provides more control and better risk management over providing liquidity.

Interestingly, investing in GLP/GM is essentially betting against GMX traders. It creates a dynamic where LP holders profit from traders' leveraged losses and vice versa. Historically, GLP holders have seen a cumulative profit of approximately $16 million over two years. GMX's comprehensive stats page offers deeper insights.

Trading on GMX 

Before actually trading on GMX, we first need to connect our Nash Wallet to GMX protocol. Start at the official GMX trading website and click on the “Connect Wallet” button in the upper right corner. That will display a pop-up message offering the different options for connecting to GMX.e will select Wallet Connect.

Next, we will see a QR code, and we then need to open the Nash app on our phone to scan it. Go to Settings → Connect with Wallet Connect -> Add New Connection -> Scan QR Code.

After scanning the QR code, inside our Nash Wallet we will be asked which chain we want to connect to GMX. We can choose either Arbitrum or Avalanche (two chains where GMX operates) and click on Approve. That's it! We should be connected to GMX and our wallet address will be visible in the upper right corner.

Once there, to trade perpetuals and execute perpetual contracts on GMX:

• Choose your trading pair.
• Decide your stance – 'Long' or 'Short'.
• Define your trade parameters: collateral asset, amount, and target asset.
• Adjust leverage using the slider.
• Review and confirm entry price, liquidation price, and entry fee.

Lastly, we've prepared a tutorial detailing how to link your Nash Wallet to GMX and harness its powerful features. From purchasing GLP tokens to trading perpetuals, to making directional bets on ETH, we've got you covered.

Don't have the app yet? Get started with Nash by scanning the QR code below with your mobile device and downloading the app today. Or, if you're reading on mobile, just click it.

Disclaimer

This article is not financial advice and is for educational purposes only. Any website and other services that are mentioned are examples and also work for other platforms. Do your own due diligence if the platforms are in line with your risk appetite and provide a valid product offering. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions. Nash is not liable for any losses you may incur.