Greetings friends -
Below you will find the next installment in our series of written interviews with various on-chain gigabrains…
This one is an absolute must-read in our humble opinion, from the wonderful @Mark2work… dishing out all sorts of wisdom on $GMX, defi in general, and more!
Interview
Q. Greetings ser… before we get into talk about GMX/markets/etc… could you share your “origin story” with us (at least as much as possible without doxing)? How did you get into crypto? What did you do before?
A. I studied aerospace engineering and worked as a strategy consultant within one of the well-known consulting firms for a few years before entering crypto full time.
At the end of 2017 I started investing small amounts in crypto and got gigarekt with the market dump so I stopped investing until the end of 2018 when I began investing more aggressively and dedicating a fair share of my paycheck to DCA into majors at the time (BTC, ETH & XRP) but without taking too much time to research what I was buying into.
I got more involved through 2020 and finally after the summer of 2021 I decided to really focus on the space as I felt it was really difficult to keep up to date with everything while working long hours in consulting.
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Q. You were the person I originally heard about GMX from, and you were doing insane gigabrain threads on it way back when most people had never even heard of it. How did you personally get interested in GMX and what was that like? And what has it been like watching your thesis play out so successfully?
A. I discovered XVIX (first iteration of GMX) in Jan/Feb 2021 through an IncomeSharks tweet and it already had a few very promising levers at that time - capable & honest team, high IQ & involved community and a powerful use case.
The potential has always been great but the process had plenty of challenges and was fairly rough so kudos to the team & community for pulling through it (p.e. High gas fees on ETH Mainnet, frontrunning oracle issues & unclear tokenomics on BSC…)
It’s great to see it gaining organic adoption and slowly joining the blue chip category.
I believe it is a net positive for the DeFi ecosystem as it sets a really good standard for new projects (p.e. Real yield, low emissions..) and enables the building of interesting projects on top of its infrastructure (p.e. Delta neutral strategies)
I believe there is so much upside left though so I do not feel yet that euphoria you usually feel when you are up x30 in an asset. I think that will come with the next x10 because at that point GMX will be a big player in the exchange industry and we can start talking about real success, but we are still very early here and avoiding overconfidence is the best way to reach mass adoption of the protocol imo..
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Q. What do you think the future may hold for GMX over the next couple years? What scenarios could you see playing out regarding it?
A.
Pessimistic scenario:
The protocol suffers some kind of exploit or does not achieve significant growth going forward and stays below 1% market share in perps (current 0,5% share).
In this scenario GMX only manages to grab a small portion of the DEX perps market and some other players become the DEX of choice for all those traders unable to trade on CEX.
Price wise it performs poorly and the FDV remains below the $1 billion mark.
Realistic scenario:
GMX maintains the monthly growth rate of the last 10 months (20%) during the first year due to several catalysts (synthetics, X4, cross-chain liquidity..) and reaches $2 billion in daily trading volume and 20M$ in weekly fees the first year entering the top 10 derivatives platforms.
The protocol manages to duplicate the volume within the 2nd year but finds its ceiling there, due to the majority of traders' preference for order books instead of oracle pricing and convenience.
At this point is the biggest player within the DEX perps space with a market share close to 50% (similar to Binance in CEXes) but remains smaller than biggest CEXes (current system needs GMX liquidity to be smaller to avoid manipulation)
FDV will hover around the $20B mark, some early investors choose to take profit but the majority of them keep most of their stack to avoid burning MPs and reap the juicy rewards.
Optimistic scenario:
The protocol manages to increase x100 their volumes within the next two years while the crypto derivatives space grows x10 (from $100B daily volume to 1 trillion)
DEXes gain a lot of market share with respect to CEXes mainly due to regulations hardening in this period
GMX increases the offering of trading products (p.e. Sports betting) and reduces the dependency of CEXes volumes through some changes in the oracle pricing system.
Forex trading has been a critical lever enabling the staggering growth in the amount of demand for trading services
Biggest fully on-chain stablecoin is built on top of GMX and that guarantees it having the best liquidity to transact on chain.
Project will enter the Top 10 by market cap and regulators will try to shut it down so GMX will need to be prepared beforehand to handle that pressure
FDV would reach $100B reaching a price per token of 7550$.
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Q. What do you think of the overall crypto/macro landscape today and over the next 6-12 months?
A. Even though the macro situation is as bad as it gets, I am confident in a midterm rally so I would expect the next 12 months to be okay. Maybe not great but good enough to allow some narratives to take off and make money to savvy investors.
There are almost always opportunities in this market to outperform even though the general situation is not full bull (p.e. NFT staggering growth in 2021) so my playbook will be keeping skin on the game, stay on the watch for new good opportunities and keep stacking ETH.
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Q. What do you think might be the next big narratives in defi? And are there any up and coming protocols you are super bullish on?
A. I believe there will be strong economic flows around ETH PoS so projects like Lido or Manifold could do really well. I am particularly bullish about $FOLD because they are tackling a massive market with potentially high margins (block building) and they will probably have a good competitive positioning thanks to their censorship resistant approach. Highly likely that some other competitors emerge in this sector.
I also remain very bullish on on-chain derivatives both futures & options as the regulatory hammer will push more and more traders to DEXes. A lot of protocols are emerging in this area and some could do really well if they manage to differentiate themselves enough from the market leaders and be present in the right L1/L2s. One caveat here is that even the biggest protocols like GMX, SNX or GNS still have margin to x100 their volumes so imho there is no need to bet the farm on “the next GMX” as there is plenty of upside left on battle tested protocols and first mover advantage is really hard to overcome. Regarding options I like Premia due to offering american options, competitive pricing and intuitive interface (tokenomics could be improved though)
Additionally, I really think the market needs a pegged & censorship resistant stablecoin. It will not happen overnight but the staggering growth of on-chain derivatives (both perps & options) enables the creation of organic yield-bearing stablecoins that are more decentralized (p.e. Buying GLP and hedging the exposure with perps) so I expect several players to make movements. UMAMI and Rage Trade are already taking steps in this direction even though it is not marketed yet as a stablecoin service, but I would follow them closely in their efforts.
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Q. Do you have any “alfa” for defi participants trying to “make it”? Advice? Tools? Processes? Wisdom?
A. General advice
Think in terms of expected value rather than probabilities
Be fast & nimble to ride new narratives, most of the upside happens at first stages
Surround yourself with like-minded investors whose judgment you can trust
Do not over diversify (less than 5 assets at the same time)
Stay hungry & keep hustling
Potential x100 projects checklist:
The size of the market the project is tackling is/will be at least in the billions
Team is capable enough to achieve a decent product market fit overtime
The protocol is able to charge a decent fee without losing many users
Project is within the top 3 players in that market
Tokenomics are low inflationary and provides real utility in economic terms to holders
Tools:
Nansen
Tokenterminal
Debank
Etherscan/Arbiscan/…
Icy.tools (for NFTs)
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Conclusion
Huge thanks to @Mark2work for the amazing interview!
Make sure to follow him on Twitter if you haven’t already!
And if you want to stroll down memory lane here is an amazing thread he did way back in January when GMX was launching on Avalanche!
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Note: Thanks to our official sponsor for this month @DexGuru - make sure to check them out for your charting/analytics/on-chain swap needs!