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Liquidity on V2

Liquidity on V2 is provided through both automated GLV Pools and individual GM Pools. Liquidity providers earn fees from leverage trading, borrowing fees and swaps.

GLV Pools​

A GLV (GMX Liquidity Vault) pool consists of:

  • List of supported markets: This is the list of markets in which liquidity will be provided
  • Long Token: This is the token that will back long positions
  • Short Token: This is the token that will back short positions

For example, a GLV could be GLV [WETH-USDC], in this case:

  • The supported markets and allowed liquidity in each market will be recommended by Chaos Labs
  • Long Token: WETH tokens back long positions
  • Short Token: USDC tokens back short positions

Liquidity will be automatically shifted between the supported markets based on utilization and the recommendations of Chaos Labs.

Note that while the list of supported markets in which liquidity will be provided are displayed for each GLV, this list can change as additional markets are approved and added.

GM Pools​

A GM pool (GMX Market pool) consists of:

  • Index Price Feed: Long and short tokens will be opened / closed based on this price feed
  • Long Token: This is the token that will back long positions
  • Short Token: This is the token that will back short positions

For example, a market could be ETH/USD [WETH-USDC], in this case:

  • Index Price Feed: ETH/USD
  • Long Token: WETH tokens back long positions
  • Short Token: USDC tokens back short positions

If a market is labelled as SWAP-ONLY or SPOT-ONLY, then the market only supports swaps and does not support leverage trading.

For single-token backed pools, both the long and short token would be the same, e.g. a single token WETH pool would have both the long token and short token as WETH.

Buying GLV / GM Tokens​

GLV / GM tokens can be bought using the GLV / GM Pools page.

Options to bridge funds to buy the tokens can be found at the bottom of the Buy page.

ETH / AVAX is also required to send the buy transaction.

Steps:

  • Select the "Market" and "Pool" of the GLV / GM token you'd like to purchase in the "Buy GLV / GM" box
  • There will be a positive or negative price impact depending on whether your purchase improves or reduces the balance of tokens in the pool
  • The price impact will be shown in the "Buy GLV / GM" box
  • If the pool is mostly balanced, a large purchase may result in a large negative price impact, to avoid this, select the "Pair" option and buy the GLV / GM token with an equal USD amount of long token and short token

Selling GLV / GM Tokens​

GLV / GM tokens can be sold using the GLV / GM Pools page.

Note that since tokens in a market are reserved based on the total open interest of the market, the liquidity available for redemption is capped at the tokens in the pool multiplied by the pool's reserve factor minus the tokens reserved. If this capacity is reached, liquidity providers would need to wait for positions to close before selling the GLV / GM token or for liquidity to be deposited by other providers. The borrow fee rate in this case would also be higher which should help to incentivise deposits.

Shifting GM Tokens​

GM tokens can be shifted using the GM Pools page.

GM tokens can only be shifted to another pool that has the same backing tokens, allowing liquidity to be moved without incurring buy or sell fees.

Price impact will still apply to shifts, for pools that are balanced, the price impact should be minimal. Price impact costs are displayed on the interface as usual.

Token Pricing​

The price of the GLV / GM token depends on the price of the long / short tokens and the net pending PnL of traders' open positions.

Fees from leverage trading and swaps will automatically increase the price of GLV / GM tokens.

There may be a spread for some long / short tokens which would result in a spread when buying / selling GLV / GM tokens as well.

GLV / GM pools aim to maintain an equal worth of long and short tokens, so e.g. when the price of a long token increases there may be a positive price impact to incentivise selling of long tokens for short tokens to rebalance the pool. While this balancing is incentivised by the pool it is still possible for pools to not be balanced at times. If a pool keeps its balance, its pricing excluding PnL should mimic a pool that is 50% long token and 50% short token and that rebalances as price changes.

Risks​

Caution should be exercised when interacting with any smart contract or blockchain application. While risks are attempted to be mitigated through testing, audits and bug bounties, there is always a risk of vulnerabilities in smart contract code.

For details of contract operation please see Contracts V2.

A non-exhaustive list of risks:

  • Smart contract risks
  • Counterparty risks: The GLV / GM pool is the counterparty to traders, if traders make a profit that comes from the value of the GLV / GM pool
  • Token risks: Bridged tokens may depend on the security of the bridge, pegged tokens have risks of depegging

While counterparty risk is attempted to be minimized through funding fees and price impact it is not guaranteed that long and short positions will always be balanced. An additional case to note is that if, for example, long positions happen to be balanced with high leverage short positions and there is a sudden price spike, the high leverage short positions could be liquidated, temporarily causing an imbalance of longs and shorts.