Dolomite enables one-click gmBTC looping strategy for GMX fees

Dolomite, the decentralized money market protocol on Arbitrum, has been pushing its one-click gmBTC looping strategy as a way for users to multiply their exposure to GMX trading fees without taking on additional directional Bitcoin risk. The strategy has generated enough borrowing demand for Wrapped Bitcoin (WBTC) on the platform that lenders are collecting a 2.27% organic yield, with no token incentives or emissions sweetening the pot.

How the loop actually works

A user starts by holding gmBTC, which is a GMX V2 liquidity token tied to the BTC-USD trading pool. That token earns a share of the fees generated by trading, liquidations, borrowing, and swaps happening in that pool. Specifically, gmBTC holders collect 63% of those fees.

On Dolomite, users can deposit their gmBTC as collateral, borrow WBTC against it, then convert that borrowed WBTC back into more gmBTC. Rinse, repeat. Each loop increases the user’s total gmBTC position, which means more fee exposure from the GMX ecosystem, while the net Bitcoin price exposure stays close to 1x.

The “one-click” part is the automation layer. Instead of manually executing each step of borrowing, swapping, and redepositing, Dolomite bundles the entire sequence into a single transaction.

The strategy originally launched on November 22, 2024, and Dolomite began accepting GM tokens as collateral in early 2024, making it one of the first lending protocols to support these assets.

Why organic yield stands out

The 2.27% yield that WBTC lenders earn on Dolomite comes entirely from the borrowing demand created by users running these gmBTC loops. No governance token farming, no liquidity mining programs, no emissions schedules propping up the number artificially.

Dolomite has also taken the unusual step of passing through 100% of GMX ecosystem rewards directly to users. The protocol takes no cut from the yields generated by gmBTC positions.

The GMX connection

For gmBTC holders, the appeal is straightforward: earn a percentage of trading fees without actively managing positions. The looping strategy on Dolomite simply takes that passive income model and amplifies it. A user with 2x or 3x leverage on their gmBTC position collects proportionally more fees, assuming the cost of borrowing WBTC remains below the yield generated by the additional gmBTC exposure.

That assumption is the key risk. If borrowing costs spike or GMX trading volumes decline significantly, the spread between the loop’s earnings and its costs could compress or even turn negative.

Competitive positioning

Dolomite’s early move to support GM tokens as collateral gave it a structural advantage. Most lending protocols on Arbitrum still don’t accept these assets, meaning users who want to leverage their GMX liquidity positions have limited alternatives. That first-mover positioning has translated into the kind of sticky borrowing demand that generates organic yield for WBTC suppliers.