Higher and more stable returns than BTC? Understanding Jupiter in one article

Background

I believe that most encryption users would agree that the carnival of the bull market and altcoin season has not yet arrived, and the overall market does not have a clear mainstream narrative, only meme coins have exploded in growth. Although the rise is fierce, without fundamental support, it is easy to cause investors to panic and dump when the overall market is unstable, and the pullback is even more violent. In such a high fluctuation situation, how many people can actually make money?

As a general retail investor, is there a way to participate in the market with higher returns and more stability than investing in mainstream currencies? WOO X Research will take everyone deeper into understanding JLP.

JLP has pumped 83% since the beginning of this year, surpassing 45% of BTC, and the trend can be clearly seen in the chart, steadily rising, even if it falls, it won’t retrace too much, all the way up.

So what is JLP? And how does it maintain the stable growth of the coin price? How long can this kind of increase continue?

What is JLP?

To understand JLP, you must first know about Jupiter. Jupiter is a Dex trading aggregator based on Solana. In addition to spot trading, it also offers other products and services. The product lineup includes Decentralization Perpetual Futures and LaunchPad. On the service side, it provides different functions for different types of users, such as Dollar Cost Averaging (DCA) and limit orders.

And JLP is the Liquidity asset of Jupiter Perp, which is composed of SOL, ETH, WBTC, USDT and USDC, and also represents that Jupiter Perp currently only supports Contract Trading for ETH, BTC and SOL.

Before the deadline, the total value locked in JLP is approximately USD 676 million (with an upper limit of USD 700 million), with SOL having the highest target weight at 44%, followed by ETH at 10%, WBTC at 11%, USDC at 26%, and USDT at 9%.

Due to the good performance of SOL this year, JLP has also benefited from it. But is JLP really just a simple blue-chip ETF in the crypto world?

Operation Mechanism

JLP is not just an ETF for blue-chip currencies, but also the counterparty of Jupiter Perp users, meaning: as long as traders make money, JLP loses money, and if traders lose money, JLP makes money. Its operation principle is similar to GMX’s GLP. The key to the sustainable operation of this model lies in the high probability of traders losing money in the long run. Being a Liquidity Provider (LP) is equivalent to being a dealer, with a high probability of stable long-term profits.

In addition, the value of JLP also comes from the fees incurred by users when they perform operations. When traders open leveraged positions, they borrow Tokens from the JLP pool, and Liquidity Providers, that is, JLP holders, earn fees from these Margin Trading activities, including borrowing fees and transaction fees (0.06%). As JLP holders, they will receive 75% of the fees generated by Contract Trading on the exchange. This fund is reinvested directly in JLP, increasing its price and promoting continuous compound interest. Based on platform revenue, the current APY is 106%.

The value of JLP comes from:

• SOL, ETH, WBTC, USDC, USDT index funds.
• Trader’s Profit and Loss
• 75% of the fees generated by opening and closing fees, price impact, borrowing fees, trading fees, etc. in the pool

How does it actually work?

Assuming the user now purchases 1 SOL as Collateral at a price of $50 and borrows $250 (i.e. 5 SOL) for long positions trading with a 5x leverage.

• Scenario 1: The price of SOL rises to $75, and 5 SOL is now worth $375.

The user returns the borrowed 250 US dollars (about 3.33 SOL), and pays Money Laundering (0.06%), leaving the user with 2.33 SOL (about 175 US dollars), of which 1 SOL is your Collateral, and the remaining 1.33 SOL is profit.

• Scenario 2: SOL price drops to $45:

Your 5 SOL is now worth $225, receiving 0.55 SOL (about $25), returning the remaining 3.33 SOL to the liquidity pool, and paying Money Laundering. The user’s Collateral decreases and bears a loss of $25.

In short, JLP earns 75% of traders’ losses and the fees generated by Contract Trading, so to determine whether JLP can continue to rise, in addition to the trend of intrinsic asset value, it is necessary to follow the profitability and volume of traders on the platform.

Can the increase continue?

As mentioned earlier, the key focus: trader profitability, platform volume.

• Platform Trader Profitability: According to Chaos Labs data, traders have accumulated a realized PNL of over $20 million in losses over the past 90 days. In the earlier days, most traders were profitable, but as time went on, the losses grew larger. When the extreme market on 8/5 came, the losses were even more severe.

• Platform volume: stable, no significant rise. The daily volume is mainly concentrated between 200 million and 900 million US dollars, reaching 1.6 billion on 8/5. SOL has the highest proportion throughout the period. In contrast, WBTC and WETH have a significantly smaller proportion of volume and relatively stable changes, without significant fluctuations like SOL.
• Platform Profits: This data is recorded on a weekly basis and reflects the profit situation of Jupiter Perp since its launch. It is evident that the overall profits have been continuously rising, with weekly profits averaging around 6 million USD in the past six months. The week of 7/29 set a historical record of 9.42 million USD, but due to a big dump in the market on 8/5. The cost structure consists mainly of Open Position/Close Position fees, followed by liquidation fees and then liquidity pool and coin conversion fees.

In conclusion, considering the losses of platform traders, stable volume, and continuously rising profits, the price of JLP is expected to continue to pump.

Horizontal Comparison of GLP and HLP

JLP is not the first token fund that serves as a counterparty to Perp Dex traders. This concept was invented by GMX, and the counterparty token is GLP (V1). It abandons the traditional order book format, allowing users to enjoy a zero-slippage trading experience.

HLP is the token fund of Hyperliquid, which is also Perp Dex. Its TVL ranks third in the whole network (first is Jupiter, second is GMX)

Comparison of JLP, GLP, and HLP:

Currently, Jupiter Perp Dex has the largest volume and traders lose the most on this platform compared to the other two. JLP is also a relatively stable choice among these three.