GMD Protocol on Arbitrum
  • 🟦GMD Protocol Overview
    • GMD Protocol
    • How GMD Protocol Works
    • #RealYield Revenue Sources
    • Earning Strategies
    • GM DAO Voting
  • 💲GMD Tokenomics
    • $GMD Tokenomics
    • Mint and Supply
    • Launch
    • Yield
    • RP for Stakers
    • esGMD
    • esGMD Seed Rounds
  • 💰Delta-Neutral Vaults
    • Delta-Neutral Vaults
    • Working Mechanism
    • Vaults Capabilities
    • Vaults Limit
    • APY and Deposit Fees
    • Vault Migration
  • 👾GMD Delta-Neutral Strategy
    • Market Volatility Risks
    • Pseudo-Delta-Neutral Strategy
    • Delta-Neutral Ratio
    • Manual Rebalancing of Deposits
    • Protocol's GLP Reserve (The Reserve)
  • 🛣️Protocol Roadmap
    • Up-to-date Roadmap
    • Initial Roadmap
  • 🔗Protocol Links
    • Dapp
    • Treasury and Multisig
    • Contracts
    • Audits
    • Socials
Powered by GitBook
On this page
  • Volatility Risks:
  • Tackling Volatility Risks:
  1. GMD Delta-Neutral Strategy

Market Volatility Risks

PreviousVault MigrationNextPseudo-Delta-Neutral Strategy

Last updated 2 years ago

Volatility Risks:

It is too complicated/impossible to completely and perfectly hedge against the volatility of the cryptocurrency market, as the aforementioned factors are too unpredictable for any given model. Even the most sophisticated strategies, such as employing shorts/AAVE borrowing, have only shown to be slightly effective, but never perfect.

In order to completely understand GMD Protocol's respective Delta-Neutral strategy based on GMX and GLP, investors must first fully understand the 3 main risks involved with market volatility:

  1. Trader’s profit and losses from GLP pool

  2. Impermanent loss due to price volatility + assets weight changes

  3. Volatility from small assets in the pool (Link, Uni)

Tackling Volatility Risks:

Among these 3 main risks, Risk 1 works in favor of GLP, as traders statistically WILL lose over a long enough period of time.

=>To put this in GMD's Risk Hedging perspective, with the trading performance fee and the additional revenue from traders' losses, GLP has almost always been outperforming other indexes/LPs throughout its whole existence.

GLP performance against other Indexes/LP

Risks 2 and 3, however, are the most concerning as crypto is a volatile asset class and impermanent loss has always been a risk that liquidity providers, in this case, GMD Delta-Neutral Vaults Stakers, have to take.

=> This brought GMD Protocol to the creation of our Pseudo-Delta-Neutral Strategy with a risk-absorbing reserve - Protocol's GLP RESERVE (THE RESERVE).

👾