How GMX Liquidity Pools Work
There are several ways to work with BTC as digital capital. One approach is accumulation. This strategy is focused on increasing the amount of BTC over time. Another approach is cash flow. In this case, BTC is treated as productive capital that should help generate spendable income while preserving the BTC position. A hybrid strategy combines these two approaches: it tries to grow BTC-denominated capital over time while also generating some cash flow.
Regardless of whether an investor pursues accumulation, cash flow, or a hybrid strategy, effective DeFi tools are needed. One possible category of such tools is decentralized exchanges, or DEXs.
In this article, however, we are not discussing spot or perpetual trading as trading strategies. Instead, we are focusing on liquidity provision. A liquidity provider supplies capital to a trading venue and becomes exposed to the economics of that venue: trading fees, borrowing fees, trader PnL, asset exposure,...
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