A microcap DEX with $12B in volumes already.

Hidden Gem

Do you know what makes a good investment strategy in crypto? Finding tokens that:

  • belong to a relevant category and generates significant market engagement.

  • is undervalued compared to competitors in the category.

  • has a strong tokenomics.

At CoinBasics, we're always on the lookout for hidden gems in the crypto space. Our latest discovery is a "Perpetual DEX" with a compelling proposition:

💡 Despite having a market cap 100x smaller than dYdX, this project generates comparable revenue relative to its market activity

Let’s dive in 🏊‍♀️


  • Let's talk about HMX, an under-the-radar perpetual DEX protocol that has generated $12B in trading volume since launching in July 2023.

  • Despite having a market cap 100x less than dYdX, HMX generates similar relative revenue based on market activity.

  • HMX offers up to 1000x leverage on crypto, forex and commodities trades on Arbitrum with fees between 0.01%-0.07%.

  • Although 40% of tokens are allocated to community incentives, HMX's value accrual incentives promote holding instead of selling.

  • HMX appears significantly undervalued at current prices based on its market cap to TVL ratio of 0.21, compared to over 3 for competitors.

  • In a bull market, HMX could reach a market cap of $100M-$120M, representing a 15-20x upside from today's $6M market cap.

First thing first, what are Perpetual DEXs?

A perpetual DEX is a decentralised exchange that provides perpetual contracts to traders. It allows them to speculate on the token prices, but unlike a futures contract, there isn’t an expiration date.

A couple of prominent perpetual DEXs at the moment are dYdX and GMX, which are incurring strong market activity. Both exchanges have an average trading volume of over $100M daily over the past quarter.

Introducing the Gem - HMX Perpetual DEX

HMX is a perpetual DEX on Arbitrum with cross-margin and multi-asset collateral support.

It is one of the few perp DEXs offering up to 1000x leveraged positions across crypto, forex, and commodities. Its Adaptive Trading Fees mechanism also offers extremely competitive fees at the moment, which range between 0.01%-0.07%.

Why is HMX on our radar?

HMX is a relatively new perpetual DEX when compared to its counterparts. However, since its launch on July 1, 2023, the DEX has recorded significant market activity in the ecosystem.

The average trading volume on the exchange is currently $70.46M. Towards the end of 2023, the average volume peaked around $150M.

Overall, the total cumulative trading volume on the exchange is $12.13B. Considering the exchange has been active for less than a year, it is an impressive feat.

The current total value locked on the protocol is $27.71M, with assets under management for its HLP vault around $24.76M. Over $5M fees have been generated, with accumulated open interest of $38.02M.

These numbers look meagre compared to other major perps like DYDX or GMX.

However, an important point is that HMX currently facilitates those numbers with a market cap of only $6M. In essence, for the weight it pulls in terms of volume, there’s a huge market inefficiency that most investors haven’t noticed yet.

Can HMX keep up the momentum?

HMX has already proven its mettle with impressive trading volumes. But the big question remains: Can it stand out in a field dominated by giants like dYdX?

The answer is yes!

HMX is making waves with its innovative offerings, particularly catching our eye is its Leveraged Market Makingfeature.

Here's what sets HMX apart:

  • HMX Liquidity Pool (HLP): Users can contribute assets to the HLP vault, stepping into the role of market makers on the platform.

  • Innovative Leverage: Leveraged market making on HMX is built atop GMX's liquidity pool. This collaboration enables liquidity providers to significantly boost their yield potential.

  • Dual Earnings Stream: By depositing assets into the HLP vault, users not only engage in market making for GMX but also for HMX. This unique setup allows depositors to earn 100% of the yields from GMX, plus additional earnings from transaction fees on HMX.

HMX's model closely aligns with GMX, benefiting both user bases.

  • Enhanced Profits: Amplifies earnings for GMX users on HMX.

  • User Migration Potential: Attractive returns may encourage GMX users to explore HMX.

But are HLP depositors protected?

To avoid LPs taking too much exposure, HMX has multiple measures to mitigate risks.

  • Max utilisation limit: There is a max utilisation for HLP, beyond which new positions are not allowed to be opened

  • Auto deleverage: Each trading position will have an in-profit price target where a position will be automatically closed for users.

  • Profit reserve buffer: It tracks the net PnL of all traders against the HLP pool.

  • Open interest limit: defines the maximum ongoing open interest that each asset can have on each side

Evaluating HMX from an investment perspective

A good project can become a bad investment if the tokenomics are not balanced and investor-friendly. Looking at HMX’s token allocation and structure, we had some initial concerns.

$HMX is the Governance token of HMX protocol. It has a total fixed supply of 10M tokens.

Looking into the stats

Key Observations:

  • Supply Discrepancy: There's a notable gap between the circulating supply (1.21M) and the total supply (10M), raising flags about valuation and inflation risk.

  • Valuation Concerns: The Fully Diluted Valuation (FDV) to Market Cap ratio suggests HMX may be overvalued, hinting at possible inflationary pressures down the line.

  • Token Distribution: The allocation strategy, as detailed in the protocol's documentation, shows a mixed picture. While the majority of allocations seem reasonable, the portion dedicated to community incentives raises concerns about potential market impact due to token dumping.

HMX’s Emission Strategy - A Closer Look.

HMX's approach to token distribution, particularly regarding community incentives, is nuanced, allocating 40% (4 million tokens) with a strategic emission schedule over four years, designed to gradually reduce the release rate.

By January 2023, 22% (880,000 tokens) of the incentives are slated for release. While this might seem concerning for the circulating supply, there's an innovative mechanism in place.

  • Escrowed Tokens: The released incentives are in the form of esHMX, an escrowed version of HMX that cannot be immediately traded. These tokens must be vested before becoming tradable, although they retain the same utilities as HMX tokens.

  • Vesting Impact: Since August 2023, of the potential 880,000 tokens, only 128,272 tokens (14.5% of the total incentives) have been vested and added to the circulating supply. This cautious approach mitigates sudden surges in supply.

  • Future Emissions: With the emission rate expected to decrease, the immediate impact on supply will be controlled. However, with over 720,885 esHMX tokens currently in the vesting process, there's a looming possibility of an increased supply in the future.

CoinBasic’s Take:

This emission and vesting strategy strikes a balance between rewarding community engagement and maintaining market stability. The phased release and vesting requirement for esHMX tokens cleverly manage market supply, potentially curbing inflationary pressures. However, the substantial number of tokens in the vesting queue highlights the need for careful monitoring to prevent future supply surges that could impact token value.

HMX Staking and Value Accrual: An In-Depth Analysis

The protocol's staking data provides a clearer picture of current trends and the effectiveness of its approach.

Staking Trends: A significant portion of the circulating supply, over 73%, is currently staked, indicating strong holder commitment and confidence in the HMX ecosystem.

Long story short: HMX’s value accrual setup is designed to make it profitable for users to hold the token and generate yield within the ecosystem.

Yield Generation:

  • High APYs: HMX stakers enjoy an APY of approximately 59%, while HLP token stakers (obtained from depositing assets into the HLP vault) receive around 46% APY. This high yield is a clear incentive for users to hold and stake their tokens.

  • HLP Tokens: Represent ownership shares in the HLP vault's assets, further aligning user interests with the health of the ecosystem.

Market Stability:

  • Consistent TVL: The Total Value Locked (TVL) in HMX has been steady at $27.7M since Q4 2023, signaling a stable and engaged user base.

  • Scheduled Incentives: Token incentives are planned to continue until July 2027, encouraging users to hold their tokens longer to capitalize on yield generation opportunities.

Market Valuation:

  • Undervalued Market Cap: With a market cap perceived as undervalued, HMX holders are optimistic about the token's potential for reflexive bullish price action, especially anticipating a bull market in 2024. This expectation is based on the protocol's solid on-chain market fundamentals.

HMX valuation

Now, for market activity, HMX is doing well in generating revenue and fees. For perpetual DEXs, protocol revenue forms the main spine of its business model.

However, for HMX, we will consider other metrics as well. We will assess its valuation relative to dYdX, GMX, Gains Network, and Perpetual Protocol, because these ecosystems are the current leaders in the category.

We have listed out key data points in the table below.

When the market cap/TVL ratio of the token is compared, HMX is the only asset that has a ratio under 1. Usually, when a market cap/TVL ratio is under 1, the protocol reflects an undervalued market price.

A DeFi protocol with a ratio under 1 is considered a good investment, but this is not a steadfast rule. So, we need to evaluate HMX on other metrics as well.

Now, regarding revenue, HMX is generating fairly lower than dYdX, GMX, and Gains. However, when the P/S ratio is compared, HMX’s ratio is on par with dYdX, and it outperforms GMX and Gains.

(Note: We have omitted Perpetual Protocol in this context because it is the only perp to register a very low TVL when compared to its Market Cap and revenue less than HMX)

The P/S ratio indicates that HMX is generating substantial fees relative to this market cap. dYdX is the largest perpetual DEX, and at the moment, it is almost on par with that protocol regarding relative market revenue.

So, how high do we think HMX can get?

Base case

As a base case, we expect HMX to easily recapture its previous high value of $16.36, about 3.09x higher than the current price.

Bull case

For a bullish case, we need to compare GMX and HMX further.

At the moment, it is difficult to assume the bullish ceiling of HMX beyond its previous high due to market volatility.

So, we are developing a historical comparison between the TVL status and market cap of GMX during its ascend. We have taken dYdX out of this comparison since its initial TVL during the beginning of the protocol stood at over $40 million.

Also, GMX has a fairly similar business and operational model to HMX. Therefore, during a bull market in 2024, capital rotation from GMX could influence the rise of HMX when market activity peaks in the perpetual DEXs.

Historically, when GMX’s TVL stood around $26M(similar to current HMX's TVL), its market capitalisation was around $70M. Over time, as the TVL gradually doubled to $50M, the market cap stood around $150M.

Considering HMX’s current market capitalisation lags behind a fair valuation relative to GMX and other data points such as the market cap/TVL ratio and revenue generated, a reasonable market catch-up would be around $100M-$120M market cap when its TVL reaches $50M.

Therefore, in the bullish case, HMX’s market cap can reach as high as $100-$120M –  a 15x-20x from current levels.

Invalidation criteria

  • If staking activity suddenly decreases, it would be considered a warning sign because it would mean HMX holders are cashing out.

  • Lack of continued trading activity or lacking relevance during the bull market.

  • A sharp decrease in APY percentage for HMX and HLP tokens.

  • Any further changes in the token emission schedule leading to changes in supply dynamics.

Technical analysis

HMX is currently at a key long-term support zone which has been tested thrice since August 2023.

The token has bounced each time from the green rectangle zone, and right now, it is up by 7.32% on the daily chart on February 1.

From a DCA perspective, the current price is a good range to accumulate HMX, but considering the collective crypto market is still choppy, the asset might register a new low.

However, from a buy conviction standpoint, this is a good range for an initial entry. The price action will be reflexive and rapid over the next few weeks once the descending trend line is breached.

How one could buy HMX

Interested in HMX? Here's how to acquire it through Uniswap, since it's not available on centralized exchanges:

Step 1: Set Up Your DeFi Wallet

  • What You Need: A DeFi wallet like Metamask. Make sure it's funded to cover your purchase and transaction fees.

Step 2: Connect to the HMX Network

Step 3: Execute the Swap

  • Network Selection: Choose the Arbitrum network from your Metamask wallet for lower fees.

  • Token Swap: Pick the token you'd like to swap for HMX.

  • Slippage Settings: Adjust based on network traffic or leave at Auto.

  • Finalize: Click "swap" and confirm the transaction in Metamask.

CB's Insight on HMX 📈💎

HMX emerges as an undervalued asset in the perpetual DEX space, notable for its strategic token utility and incentives. Despite initial skepticism regarding token allocation, the protocol's strengths in product quality, market data, and trader retention, supported by its Total Value Locked (TVL), make a strong case for its potential.


  • Market Potential: Poised for significant appreciation in a bull market.

  • CEX Listing on Horizon: Anticipated in Q1 2024 to attract more investors.

  • Investor's Choice: Offers a promising diversification option in perp DEXs.

Takeaway: HMX represents a solid investment opportunity, undervalued but with a clear path to growth and wider recognition in the near future.