Uniswap keeps marching own creating a new paradigm in the industry. The LEO token has taken advantage of this and at the moment of writing this it has 380k USD liquidity on Uniswap.
Obviously, the incentive works 😊. Also having a great project!
source
At the moment the total marketcap for LEO is around 1.16M. What does it mean when a token with a marketcap of 1.16M has a liquidity of almost 400k?
This is quite a unique situation, because even with listings on CEX (centralized exchanges) usually the liquidity is much less than this. LEO has achieved far bigger liquidity dept on a DEX, than any CEX can provide.
Even more interesting is that Uniswap doesn’t works with the classic order books as a method for price discovery. It works on the principle of pools and liquidity in them. What matters is how big the pools are.
Uniswap as the name suggest is a swap platform. There is no buy or sell orders. The price is discovered based on the liquidity provided in ETH value and the matched amount of tokens.
At the moment LEO has 771K pooled LEO tokens and 548 ETH.
LEO Price = 548/771000 = 0.00071 ETH (0.248$)
Each time when a trade/swap is made some of the ETH tokens from the pool are converted to LEO or the opposite, depending is it a buy or sell. Once a liquidity provider pool its tokens, the amount of tokens they have is fluctuating and not fixed, depending on the price, or the swaps made.
How much is needed for LEO to go up in value?
First the optimistic scenario. How much buy pressure is needed for LEO to go up?
We will be looking at 4 cases:
- LEO at 0.3$
- LEO at 0.5$
- LEO at 1$
- LEO at 2$
What is needed for these prices to be achieved?
Using the calculation provided in the Uniswap whitepaper:
LEO_pool = 771,000
ETH_pool = 548
Ivariant = 771,000*548 = 422,508,000
Example when a buy is made with 10 ETH:
ETH_pool = 548+10 = 558
LEO_pool = 422,508,000/558 = 757,183
Buyer receives LEO: 771,000 - 757,183 = 13,817
When we iterate this for the price targets we get this:
| LEO Price $ | ETH | LEO | $ |
|---|---|---|---|
| 0.3 | 55 | 70,323 | 19,195 |
| 0.5 | 231 | 228,628 | 80,619 |
| 1 | 555 | 387,947 | 193,695 |
| 2 | 1,010 | 499,814 | 352,490 |
The $$ values are for ETH at 349$.
To get LEO to 2$ we need around 1000 ETH buy at todays price of ETH 349$. For a 1$, only 555 ETH 😊.
From the calculation above what we can conclude is that with the current pool size that LEO has,now it is possible to buy a 200k LEO and only doubling the price. The price for this trade will be somewhere in the average or around 0.33$. This kind of trades were simple not possible before.
I doubt that any CEX will bring this kind of liquidity.
How much is needed to push the price down?
Now that we have seen the optimistic scenario, lets take a look how much dumping LEO can take? How much LEO needs to be sold to push the price down?
We will be looking at 4 cases:
- LEO at 0.2$
- LEO at 0.15$
- LEO at 01$
- LEO at 0.05$
| LEO Price $ | ETH | LEO | $ |
|---|---|---|---|
| 0.2 | 56 | 88,000 | 19,593 |
| 0.15 | 122 | 220,000 | 42,458 |
| 0.1 | 200 | 444,000 | 69,890 |
| 0.05 | 302 | 950,000 | 105,572 |
For LEO to go down to 0.2 a 88k LEO need to be sold for 56 ETH. To reach the 0.15$ a total of 220k LEO needs to be sold.
In the past LEO has shown that it has one of the strongest hands in crypto. 220k tokens sold at ones is most likely not going to happen soon.
What the calculation above shows is that with the liquidity pool that LEO has build on Uniswap, stakeholders can now have a bigger confidence in the token. Pushing the price down significantly with the current size of the pool is very hard.
More than 200k tokens are needed to push the price down from 0.248 to 0.15$. At the same time a buy pressure of that same amount will double the price. Remember the dollar values are with the current ETH prices. LEO is now pegged with the ETH price. If ETH goes up in value in dollar terms so will LEO.
If the size of the LEO liquidity pool remains stable in the future the price of the token can barley move down.
All the best
@dalz