Even though market sentiment is still low as a whole, GMX tokens have almost doubled in the last two weeks.
This week, traders betting on the growth of Arbitrum, a popular Ethereum layer-2 scaling solution, drove the price of tokens for the decentralized exchange (DEX) GMX to a record high.
With its on-chain trading interface, GMX lets users trade spot and perpetual futures for low fees. Arbitrum, a layer 2 network built on Ethereum, has helped it gain some popularity. Data from DeFiLlama shows that GMX has locked up more than $309 million on the Arbitrum network and $78 million on the Avalanche network.
Layer 2 is a set of separate blockchains or systems that are built on top of layer 1 blockchains. These solutions combine several off-chain transactions into a single layer 1 transaction. This helps reduce the amount of data, which makes network transactions faster and cheaper.
Arbitrum, one of the most popular Ethereum layer 2 networks, successfully launched its Nitro upgrade in August. This improved the user experience for application developers, lowered network fees, and sped up transactions.
Technical documents show that the upgrade will lower Arbitrum‘s fees because it will compress the data files that are sent to the Ethereum mainnet for validation. After the Nitro upgrade, these kinds of improvements led to a jump in fundamentals. On September 5, Arbitrum saw a record number of transactions: 349,000. This was mostly because transactions were settled almost instantly for fees of less than 10 cents.
Such improvements are a benefit for Arbitrum users over Ethereum, where transaction fees are over $1 and can go as high as $9,500 during busy times, and transaction speeds are much slower.
How Arbitrum is driving GMX token growth
Since Arbitrum hasn’t released its own tokens yet, investors are turning to GMX and other tokens that focus on Arbitrum to get access to the layer 2 network. In July, GMX traded for just under $15. On Monday, demand caused the tokens to rise and get close to their all-time high of $56.
Daniel Kostecki, director of financial services company Conotoxia, said in a Telegram message that investors are waiting for the popular Arbitrum network to launch its own token. “But growing interest needs to be met in some way, and as the Arbitrum network has grown, the value of the GMX token has gone up.”
Even though bitcoin and ether were trading in narrow ranges, the cryptocurrency market as a whole was stable. Bitcoin is trading just under $20,000 on Tuesday, while ether has seen increased volatility ahead of its Merge event later this month.
In the past month, GMX has added about $100 million in total value locked (TVL) to its platform, and the number of addresses holding the tokens has grown from 13,000 at the beginning of August to over 46,000 now.
Since it opened in 2021, the DEX has handled more than $45 billion in trades and made $60 million in revenue, some of which is shared with users who provide liquidity to the protocol. Data also shows that as of Tuesday, GMX had more than $82 million in open interest, which is the number of unsettled futures contracts. This shows that people are interested in its on-chain futures.