For those of you with little experience of uniswap pools, here is a nice example of how they work.
This is the chart of BBLURT taken a few minutes ago.
About 8 hours ago, a user sold 145k BBLURT, swapping them for WBNB. Because the liquidity is fairly modest, this on its own led to a price drop from about $0.0058 to $0.0042 - a drop of almost 28%.
I'm not going to comment on the wisdom of doing one such large trade, but a 28% drop based on just that one trade is something to be expected. The swap pool calculates the swap prices based solely on trades done and the current liquidity. It does not care one jot about the prices on any other markets.
Also notice the mot recent green candle; that was due to a couple of swaps from WBNB to about 20k and 29k worth of BBLURT. This resulted in a modest price rise to the current $0.0046.
Looking at the other exchanges, the BLURT price is currently averaging at around the $0.0060 level. This is a good example of what an arbitrage trade looks like: buy BBLURT, convert to BLURT then sell it on another platform. Alternatively, as an investor, you can sell BLURT for BNB, send that BNB to BSC and buy the BBLURT more cheaply.
This is how swap pools become approximately the same price as the open market. Any large discrepancy in the algorithmic swap price is balanced by humans, or bots, doing the most profitable trade.
There is just one more calculation left to do: the fees. There will be fees at every step of the arbitrage, so the price differential must be larger than the sum of the fees. As we are looking at about a 20% price difference, that looks like a worthwhile trade. Something like 10-20k BBLURT looks large enough to be meaningful but not too large to move the price back up too quickly. Remember that the swap price you get is the one calculated after you submit your trade - that's what slippage means.
Good luck!
Buy BLURT on Probit, Ionomy, Hive-Engine and STEX.
Buy BYT on Hive-Engine
Well... that worked pretty quickly! price now up to $0.0054 :-)
Unless liquidity increases further, expect to see such wild price swings.
LPers receive both the incentive token, RBS, and the swap fee - although that swap fee does not appear as a payment but is added to the pool, thereby increasing its value slightly.
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I think the BBlurt has been a good thing for Blurt and it is helping us all. I have added some liquidity on RBS Defi. It is fun to play with it.
The fees on BSC are so low. I had some experience with Uniswap and the fees on the ETH network are so high and there are so many failed transactions too.
Great, thanks! yes, BSC fees lower than ETH but one still needs to keep an eye on them and avoid micro-txns that could cost more than they are worth.
It's good that you explain how this works. I see so many posts here on Blurt went up x % to the moon, and after weeks/months of this and it still hovered in the same general area people might not understand whats going on, but they do understand the price is still in that same area, lol.
While a wary one as you know, its good to see that the extra liquidity for now has increased velocity, demand and price.
This was one of my largest concerns when I saw this coming. Folks willing to tank values to cash out. Not bright though to do so much at once. You sell into the buy orders, and will quickly find yourself selling at ridiculously low buy orders as you eat your way through the book. Exactly how the large whales manipulate the markets, wash trading among themselves half the time to create cycles of despair and FOMO.
If I wasn't worried about the increasing regulation here in the US I would have gotten into position trading. All one has to do is have patience really, and look at previous support positions.
There are no sell and buy orders in a swap pool! There is no order book.
price changes are algorithmic and calculated for every new trade. ;-)
A couple of questions please, if you have the time and inclination.
If there are no orders, where do they go when one sells them? Who or what is catching them at the algorithmic prices?
Based on traditional buy/sell walls, one could look and see before selling what loss if any they would incur on a large sale, which could be nothing. Would it be fair based on looking at the chart you shared which mimics a low price buy wall that one would always cause a sharp drop in valuation on all large sales?
Appreciate any insights you could share.
The pool holds the tokens - that's what the liquidity means.
So when you swap one token for another, your token is added to the pool and the other token is removed from the pool. The new ratio of tokens then determines the swap price.
So if one token keeps getting sold, the number of that token increases in the pool while the other is depleted - hence it builds up the token with the falling price.
That's what the slippage calculates - how far from the current price a trade is allowed to slip away from. On most pools can set a max slippage and the trade will not go through if it is higher. This value depends on both the size of the swap and the size of the pool - larger pools will have smaller price slippage because each trade is a smaller % of the available liquidity.
That's also why there is quite a lot of info given before a swap is actually executed - so the user can check what effect it will have. Coz the swap price is the price calculated after the swap is done and not at the visible current price.
Is such a mechanism in place here?
If not, what typically happens? I'm envisioning a scenario where the price falls below other markets for Blurt (Ionomy, HE etc) and Blurt begins fleeing there to take advantage of the arbitrage opportunities.
I appreciate your sharing with me. What I know is limited to what I saw happen with the Cub farms, coupled with many testaments of people getting scammed or the price of the overall structure dipping so hard that hundreds of percent in APR still resulted in a loss of fiat valuation.
Seems to me that in many ways this is like going to a casino, where regardless the house will always make out (in this case due to fees they extract on others property movement within their casino/farm) with most of the risk being born by those investing. So appreciate new views into how this works.
The big difference between Cub and BBlurt is precisely that Blurt has other markets, hence if BBLURT drops very low it is a buying opportunity - exactly what the post above shows.
It is all a casino - including the licensed markets such as derivatives - even casinos need a licence ;-)
I have also said many times that uniswap mathematics is garbage - but one can still make money from junk. It is the great crypto swindle.
Designing a system that doesn't suck takes some skill :-)
To answer the question about slippage, it is there as info and protection - one can override it if one chooses.
I appreciate your ability to see through the illusions and more so your candid way of describing it.
Interestingly, one user alone created a drop of almost 28%. It means that we are at the beginning and that we can build the whole BLURT environment very well. Since many of us come from previous blogging experience, we can do well here, without repeating the mistakes we made before.
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