In a recent blog post, Bitcoin and altcoin legend and former BitMEX CEO Arthur Hayes talked about holding large amounts of GMX and LOOKS coins. According to Hayes, the main reason he invested in both was their platform revenues and their potential to outperform standard US Treasury bonds. Let’s take a quick look at the on-chain data and compare GMX and LOOKS to competitors to determine if Arthur’s assumption works.
Altcoin GMX made 60 percent in one month
The week before Nov. 16 brought a significant stream of fees to decentralized finance (DeFi) following the centralized exchange (CEX) exit triggered by FTX’s bankruptcy. Temporarily high entries into DeFi pushed GMX to outperform Uniswap on protocol fees. On November 28, GMX earned approximately $1.15 million in daily transaction fees, surpassing Uniswap’s $1.06 million in transaction fees on the same day.
Although the use of GMX is declining, the token is outperforming the industry. The GMX token is just 8 percent off its all-time high after gaining 59 percent over the past 30 days. Since Uniswap is the closest competitor to GMX, comparing the two protocols can show which users prefer to use it for trading. Aside from the November 28 fee increase, Uniswap continues to outperform GMX in terms of fee revenue and daily active users. Unlike Uniswap, GMX distributes fees to stake holders of various GMX and GLP tokens.
What do the daily transaction fees, annual returns show?
The 90-day peak of Uniswap fees is $5.9 million, while the top of GMX’s daily fees is just $1.4 million. The large difference in peak fees may indicate that GMX is reaching capacity when it comes to platform usage. GMX’s fees are split 30 percent to GMX token holders and 70 percent to GLP holders.
GMX’s current homepage estimates an annual percentage return of 10 percent for GMX tokens and 20 percent for GLP tokens. While GLP meets Hayes’ target of 20 percent annual returns, liquidity providers are vulnerable to price drops. This makes it difficult to succeed against the conservative Treasury bond strategy.
OpenSea usage continues to surpass LookRare
LooksRare, which is also the home of the LOOKS token, was also mentioned by Hayes because of the fees that the NFT protocol earns. To date, NFT marketplaces, including Coinbase, have struggled to remove OpenSea’s market dominance. OpenSea seems to have a natural daily flow of active users between 35,000 and 50,000, whereas LookRare has a small range of 350 to 500 users. According to this metric, OpenSea is 100 times larger than LookRare and the trend seems to be unchanged in a 90-day time frame.
Another difference between the two protocols is that OpenSea does not have a reward token through staking and inflationary minting. Reward emission could point to Hayes’ target of 20 percent. However, it should be noted that LookRare has a bad reputation for “wash-trade”. The primary purpose of these traders is to earn more LOOKS tokens, but this can have the effect of changing the price.
Both altcoins may not surpass Opensea
The recently announced UniSwap NFT aggregator can help LookRare gain more “real” transactions because users can purchase LookRare NFTs without ever visiting the site. The current fee distribution is heavily focused on OpenSea. cryptocoin.com As we reported, in the past 90 days, OpenSea has hit a peak of $2.5 million in daily fees, while LookRare has earned over $200,000 in daily fees just once in the same period.
Researching the protocol fundamentals that Hayes mentioned is an important first step when considering investing in DeFi and altcoin projects. Given the competitive landscape for both LookRare and GMX, both protocols will need much more adoption to surpass the current leaders. Also, the 20 percent target set by Hayes can be challenging when analyzing emissions and token prices.
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