Dear Dragon,
One of the reasons we decided to include GLP tokens in our HLP pool was to increase the capital efficiency and maximize earning potential to our HLP depositors through the re-hypothecation of liquidity.
Approximately three months ago, GMX unveiled its v2. Since its launch, we’ve been closely observing the performance of v2 GM pools in comparison to v1 GLP.
GMX v2 has progressively gained traction due to its enhanced user experience and functionality, resulting in a gradual shift of trading activities from GMX v1 to v2. As a result, yields for GLP have gradually decreased, consistently hovering around low single digits in APR for the past multiple weeks.
On the other hand, GM tokens [$BTC & $ETH], the market making pool for GMX v2 traders, have reported multiple consecutive weeks of double digit APR, as an increasing number of traders migrate to the more user-friendly v2.
Notably, this past week, GMX’s STIP proposal was approved by the Arbitrum community. The proposal outlines GMX’s commitment to incentivize their GM pools with 6M $ARB (approximately $4.9M) from the grant received from Arbitrum STIP. Given this development, we anticipate that the APR for GM pools will see a significant uptick.
In an effort to maximize yields for our HLP depositors, we believe now is the appropriate time to transition away from GLP towards GMX v2 GM pools.
HLP Composition Adjustment:📑
Current Target Composition:
GLP, while historically a reliable choice, has experienced a gradual decline in yields due to the evolving trading landscape and the increasing popularity of GMX’s v2 platform. The current HLP composition is:
- 90% GLP
- 10% USDC.e
New Target Composition:
In response to the changing market dynamics and our commitment to maximizing returns for our HLP depositors, we are making an important shift in our HLP composition. The new target composition will consist of:
- 50% GM (ETH)
- 40% GM (BTC)
- 10% USDC.e
With this change, our HLP stakers will stand to earn more rewards while still be exposed to roughly the same target underlying asset compositions.
Why this Adjustment Matters:
The transition away from GLP to GMX v2 GM pools means our HLP stakers can anticipate higher and more sustainable rewards, primarily for two reasons:
- Capitalizing on Growth: GMX has strategically earmarked a significant portion of the grant as a subsidy for trading fees for GMX v2 traders. This move, when coupled with the current momentum witnessed by GMX’s v2 platform, will accelerate the trading activity growth on the v2 and positions the GM pools to deliver significantly higher yields than the GLP, as GM pools earn 67% of the fees generated on GMX v2.
- ARB Incentive Rewards: Additionally, we anticipate an extra boost to the APR due to GMX’s commitment to incentivize their GM pools with 6M $ARB (approximately $4.9M) from the grant they receive from Arbitrum STIP. This further strengthens the attractiveness of GMX v2 GM pools and aligns with our goal of maximizing returns for our HLP depositors.
Rewards 🎁
The extra ETH yields from GM pools and ARB incentive rewards received from STIP program will be auto compounded back into HLP for users — the same way ETH rewards from GLP are being auto-compounded. Users will see this yield in the form of higher value of the HLP token.
Timeline ⏰
We will implement this change as soon as possible to maximize the yields for our HLP stakers. Our engineering team is in the process of finalizing the integration code with the GM pools. We will make the announcement on our official Twitter (X) on the exact timing.
While it is unfortunate that HMX is not part of the recipient in the first round of Arbitrum’s STIP, we are actively exploring alternative strategies, like the one mentioned, to ensure our community continues to reap their maximum benefits.
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