Development Status of GMX V2 under the Arbitrum STIP Program

Recently, a perpetual contract trading platform received a short-term incentive of 12 million ARB tokens on the Arbitrum network. This funding is primarily used to support the development of the platform's V2 version and to promote the overall growth of the Arbitrum DeFi ecosystem. Nearly 10 days have passed since its implementation on November 8. Let's analyze how this funding has been utilized and whether it has helped the platform achieve its expected growth targets.

Main Uses of the Incentive Program

The 12 million ARB tokens will be distributed over a period of 12 weeks, with a weekly allocation. The funds will primarily be used for the following aspects:

1. Incentive V2 version of perpetual contracts and spot liquidity
2. Encourage users to transfer liquidity from V1 version to V2 version
3. Subsidize transaction fees, reducing to an average of 0.02%
4. Sponsoring projects developed on the platform's V2 version

Through these measures, the platform aims to enhance its competitiveness, especially in terms of transaction fees to compete with centralized exchanges. At the same time, the higher capital efficiency of the V2 version is also expected to strengthen the overall strength of the platform.

Liquidity Change Analysis

As of November 17, the overall liquidity of the platform (including V1 and V2 versions) increased from $496 million on November 8 to $528 million, a growth of 6.45%. Specifically:

• The liquidity of version V1 decreased from 400 million USD to 364 million USD, a decline of 9%.
• The liquidity of V2 version increased from 96.77 million USD to 164 million USD, an increase of 69.5%.

Although the overall liquidity growth is not significant, the substantial growth of the V2 version is still of great importance to the platform. However, it is worth noting that the liquidity growth of the V2 version mainly occurred on the first day of the incentive program, after which the growth rate significantly slowed down.

Changes in Open Interest and Trading Volume

In terms of open interest, it increased from $152 million on November 8 to $182 million on November 13, but then decreased to $137 million by November 17, even falling below the level prior to the incentives.

In terms of trading volume, there has been significant fluctuation during this period. It reached its peak on November 9, at 555 million USD; on November 16, it was second highest, at 365 million USD. Recently, the trading volume of version V1 is still higher than that of version V2.

Imbalance in Long and Short Ratios

The V1 version of the platform has always had a serious imbalance in the long-short ratio. As of November 17, the long open positions for the V1 version amounted to 19.26 million USD, while the short positions were only 687,000 USD, resulting in a disparity of nearly 30 times.

The V2 version attempts to balance long and short positions through fee adjustments, but the results are not ideal. Currently, the total open interest for long positions in the V2 version is 51.66 million USD, while for short positions it is 28.67 million USD, indicating a significant gap.

For certain assets, such as SOL, DOGE, XRP, etc., long positions have reached their limit, and there is a significant difference in the long-short ratio. Taking XRP as an example, the long position is 4.42 times that of the short position; the long position for SOL is 2 times that of the short position.

Although some trading pairs offer seemingly attractive arbitrage opportunities, there are still many challenges in actual operations, making it difficult to achieve a long-short balance.

Summary

Nearly 10 days after the implementation of the Arbitrum incentive program, the liquidity of the platform's V2 version indeed achieved a 69.5% increase, but the momentum of growth has not been sustained. The open interest and trading volume have not shown significant growth, possibly more affected by market fluctuations.

At the same time, the various liquidity pools of the V2 version are still facing the issue of imbalance between long and short positions. Although some pools offer higher annualized returns, liquidity providers may face higher risks due to the trading targets including highly volatile altcoins.