Hello Bubble Riders!
A couple of weeks ago I stumbled into something strange. I not only found coins that were making consistent gains in this crypto winter, but after some research, I also could tell you why they were likely to continue to make money during it.
In this newsletter, I’m going to explain GMX. In the next, I’ll explain X2Y2. Paid subscribers will learn about GLP–which is the most promising to my mind.
To put things in perspective, we’re talking about 30% – 40% gains in this crypto winter. It’s very good while the market declines, but you shouldn’t expect 10x from these just yet. Also, these coins aren’t simple buy-and-hold items. You’ll want to trade them using the principles of The Art of The Bubble.
Having noted those points, let’s get to it.
1 What is GMX?
GMX is the governance token for the GMX decentralized exchange. It allows for traders to use leverage in their trades … and most of the people get wrecked. That’s why I’m so cautious about discussing leverage with my people–it’s very hard to control.
Here’s where you can view all the exchange data: https://stats.gmx.io/. The chart you’ll want to look at is this one.
The purple line shows the profits and losses of leveraged traders. When it’s below the middle line, they are losing money.
The reason that matters is that GMX tokens receive 30% of those losses as fees. So, there’s an obvious reason why GMX continues to go up. Basically, as a GMX holder, you are taking the position of the casino. You won’t win every day, but you will win long-term consistently.
2 How Has GMX Performed?
Here’s an image of GMX’s performance over the past 3 months.
It’s positive, but you’ll notice that it’s not a straight line going up. Even if gains from traders is consistent, people are still buying and selling this thing as part of their larger crypto portfolio (which probably isn’t doing great).
Think of it this way 30% of the coin’s value is always gaining, but the other 70% can still go down from sell pressure. So, you do have volatility with this coin.
If you check its correlation with ETH, however, you’ll see that it’s pure static.
It has a .002 correlation with ETH, meaning that it just does its own thing. And that means you can trade it intelligently in a crypto winter.
3 How Do You Trade GMX?
At this point we know two things:
- GMX makes money from wrecked traders.
- GMX is volatile because of those same traders buying and selling the coin.
What point one gives is turns out to be crucial: an independent reason to think that the crypto could go up despite the macroeconomy.
You’ll recall from Lesson 9 of The Art of The Bubble, the macroeconomy typically structures your trades.
Our Three-Stage Algorithm basically just asks three questions.
- Is the macroeconomy healthy enough to invest long?
- If yes, is the industry healthy enough to invest long? How much by way of percent exactly (20%, 80%)?
- Which coins (or stocks) in particular offer the best potential to do well?
Since GMX has an independent reason for rising–one that might even do better of macroeconomic circumstances are unexpectedly terrible, you can just jump straight to point three: does GMX have positive momentum?
Obviously, paid subscribers get access to our proprietary signals, but you won’t do too poorly just trading something like the SMA 160 (lesson here).
This was a short lesson, but I hope it was a helpful one. GMX is uncorrelated with ETH for specific reasons, meaning that it could rise substantially despite the wider crypto market.
In the next lesson, we’ll look at X2Y2 — which is similar in a way, but involves an additional layer of analysis to make it work. (GLP involves a different approach still). For now …
This week I wrote a number of pieces that are related to this post, so you might want to have a look if you’ve missed them.
That’s it for this week. Remember to join us on Discord if you haven’t already.
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