How To Value DeFi Tokens: A Case Study on GMX

By Michael @ CryptoEQ | CryptoEQ | 31 May 2023

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GMX Key Metrics

Staking Rates and APY

Users' staking rates on GMX have been steadily increasing since August 2021 as ecosystem stakeholders move to take advantage of real yields and reward opportunities. The more notable takeaway here is not in GMX staking rates. However, it's in the growing esGMX staking rate. Stakeholders can vest their esGMX rewards to receive liquid GMX tokens after a 12-month period. Instead, more stakeholders are choosing to re-stake their esGMX rewards to compound their rewards. This has become a common theme in the emerging “GMX Wars” concept, where projects are competing to refine their yield strategies to acquire more and more GMX rewards over time.

GMX esGMX cum staking may 2023 Source

As of Q2 2023, nearly $75 million in esGMX rewards have been paid out to GMX stakers, with the majority of these rewards being re-staked as shown above (70% as of Q2 2023). A similar trend is seen in GLP, with nearly $400 million in GLP staked on the network. The actual APY of GLP on Arbitrum shows considerable volatility but overall maintains a yield rate of around 20%. The more liquidity there is in the multi-asset pool, the more margin trades and swaps can be executed on GMX. This leads to more growth for GLP holders over time.  

dApp User Retention

User retention is incredibly important for platforms like GMX as they rely on traders’  continued usage of on-chain liquidity to generate revenues. Without this recurring activity, LPs wouldn’t see revenue returns, and stakers wouldn’t have incentives to secure the network, leading to a slow drain of capital.

The chart below depicts the user retention rate of GMX traders. It works by grouping users into cohorts of wallet communication on a weekly basis for eight weeks at a time. Based on the data, it appears that around 8% of weekly users remain active on the GMX platform, enough to generate revenues via swaps and margin trades. For more context, weekly transactions (and weekly users) have been trending up through 2023.

gmx user retention may 2023 Source

GMX Fees and Revenue

The GMX protocol generates revenues through a few different avenues. The core ways involve charging fees on opening or closing positions and through a borrowing fee, which is deducted per hour for leveraged positions. GMX remains one of the highest-grossing protocols in terms of generated revenues and collected fees compared to all other cryptocurrency projects. As of Q2 2023, GMX ranks routinely within the top five to ten protocols, collecting anywhere from $250,000 - $650,000 in daily revenues on average via fees. To put this in perspective, GMX consistently ranks above other protocols, such as Bitcoin, SushiSwapAaveCurve, and more.

gmx fees

This fast rise in generated revenues stems from the exploding interest and growth in GMX’s open interest in open/short positions from traders. As of Q2 2023, the total value of open interest eclipsed $200 million for the first time.

Cumulative revenues have been increasing at a very healthy rate for GMX since the fall of 2021. As of Q2 2023, GMX has officially surpassed $40 million in total revenue, though that metric is expected to increase substantially throughout the remainder of the year with the rate of revenue gains seen in the past 90 days.  

GMX fees may 2023 Source


Note: Different websites view the ratios differently. For example, token terminal views our definition of P/E as P/S, while they view our definition of P/S as P/Fees:


Let’s apply the concept of the P/E (price to earnings) ratio used in traditional finance (TradFi) to blockchains. Investors can use this ratio to determine whether a blockchain is fairly priced by comparing its P/E ratio with blockchains of a similar function. For example, layer-1 (L1) blockchains can be compared with one another, as well as among dApps and DeFi protocols. The P/E ratio is most suited for blockchains that are profit-seeking, such as DeFi protocols, which can earn high-interest income from user borrowing.

Unlike traditional companies, blockchain protocols do not have shares, so we can manipulate some variables to create a more useable equation:

GMX PE equation

The fully diluted market cap, which we use for the P/E ratio, is conventionally calculated as the fully diluted (maximum) supply of coins, multiplied by the price. Total earnings represent the annual total revenue that goes exclusively to the protocol itself, which can also be defined as profit. A higher P/E ratio suggests that the project is overvalued, while a lower P/E ratio suggests that the project is undervalued. 


The P/S (price to shares) ratio is defined as market cap/annual revenue, and this ratio can be used in the same way as the P/E ratio. The only difference is that the denominator for P/S, annual revenue, includes revenues that go to protocol users. If all revenue goes to the protocol, then the P/S ratio will be the same as the P/E ratio. Investors can compare these ratios between different blockchains to determine how appropriate the price of the protocol and its tokens are relative to its total revenue.

GMX revenue may 2023 vs competitors Source

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.

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