Collateralization under stress
GMX v2 (GMX Synthetics)'s assessment for RD-F-068 — scored yellow on the v1.7.0 rubric. The evidence below is the curator's reasoning for this score.
Evidence summary #
Under a 50% drawdown of BTC/ETH: dual-token pools (WETH/USDC, WBTC/USDC) partially self-hedge because the pool's long-side collateral (WETH/WBTC) also drops, partially offsetting long-trader PnL (longs lose when price drops). Short-trader wins must be paid from pool USDC reserves; ADL fires when MAX_PNL_FACTOR_FOR_ADL is breached, preventing insolvency. Synthetic markets (SOL, LINK backed only by USDC short-side collateral) carry elevated ADL risk: rapid index price moves are not offset by collateral price appreciation. The LD Capital analysis (2023) specifically flags synthetic markets as having higher ADL frequency. A full simulation (on-chain per-market reserve factors, live OI, live pool balances) was not completed due to stats.gmx.io ECONNREFUSED and absent on-chain DataStore reads. Yellow: ADL mechanism is structurally sound on major BTC/ETH markets; synthetic market tail risk is elevated and unconfirmed by simulation. Reserve factor nominal range 0.5-0.95 per docs.gmx.io.
Sources #
- URLLD Capital — GMX v2 analysis: synthetic markets flagged as higher ADL riskhttps://ld-capital.medium.com/changes-and-impacts-of-gmx-v2-6ed0e4c10f93retrieved 2026-05-05
- GMX v2 docs — Providing Liquidity (pool composition)https://docs.gmx.io/docs/providing-liquidity/retrieved 2026-05-05
- GMX v2 docs — Liquidations and ADL mechanismhttps://docs.gmx.io/docs/trading/liquidations/retrieved 2026-05-05
Methodology #
Determine whether under curator-defined stress scenario (top-3 collateral assets drop 50%), protocol net collateralization falls below 110%.
See the full factor methodology and distribution across all protocols →