A Tip & A Trick from Matt…
Hey fellas, you know me. I am the face of looking “Brave” while “Favoring Fortune”. I saw that wanna-be CEO from another timeline writing about Cronosphere and I thought maybe I could chip in for the community too. Just like Mark, I’ve been lurking in Telegram, lifting a glass of wine while silently mouthing “Thanks for the reflections!” whenever BubbleBot makes an appearance. You may not believe it, but I am trying my best to get into the Top 100 holders list. It’s just so damn competitive!
Listen, here’s the thing, there is something you can consider to min/max your investment in $SPHERE. I decided to share it out here so that everyone who reads this can gain an unfair advantage over others who didn’t. It’s not really game breaking but if enough people start doing this, it might help the protocol become what everyone wants it to be, including myself.
I’m gonna have to science the s**t out of this but stay with me. Read on and let me know what are your thoughts. Feel free to let JPMoreGain have your feedback, he knows how to get me. Serious feedback only please, a saucy line will not get you far with me.
So this is what I am going to write about today. For those who aren’t sure what it is, you can see this parameter on the swap screen at MMF whenever you do a token Buy/Sell.
So what is Price Impact? On MMF, it is explained as “The difference between Market Price and Estimated Price based on the size of the trade.” In simple terms, you can also define it as how much the price will move if you execute the order that is shown on the screen.
In the example above of a 1000 $SPHERE buy, we can assume that the price of $SPHERE will adjust upwards by approximately 1.24% when the swap is executed.
So if we were to increase the amount of $SPHERE in a buy order, you can see that price movement will swing upwards significantly. Let’s simulate a sell now, shall we?
It’s always a good idea to take a look at Price Impact before hitting the “Confirm” button. Look at how much you will be moving the price whenever you perform a swap. It’s good practice and I have made it my habit whenever I transact on DEXes.
My Tip of the Day
So now you understand a little more about Price Impact and what it does. As we journey together to the Cronosphere, let’s consider some best ways to go about transacting with $SPHERE and how you can benefit most out of it by spending a few seconds to strategize before hitting “Confirm”.
These are the basics, and it is simple. Whenever performing a transaction, be it a Buy or a Sell, it is in your benefit to not move the price as much as possible. Imagine this, if you make a substantial transaction and Price Impact is 5%, that means that you are possibly losing out on a 2.5% average price for your trade since price will move from 0–5%.
Try to break the transactions, if possible, to keep Price Impact as low as possible and stagger the transactions over a short period of time. This way you get more out of the deals that the DEX is offering.
Personally? I do it slightly differently and here’s what I do and the logic behind it.
I “almost” ALWAYS buy whatever amount of $SPHERE I want at one go. I want the price to be impacted so much that the next guy who buys after me will have to pay a higher price. Imagine this, if everyone practices this strategy, during peak periods of high buy volume and when the general public picks up news on the upcoming NFT Collection/NFT Marketplace/Vaults, volume will go crazy and by doing the above, I am afraid we won’t be stopping at the Cronosphere and might go beyond it!
However, in a situation of low buying activity, always always DCA your buys and make sure Price Impact is kept low by adjusting the amount of $SPHERE purchased. This way, you don’t spend more unnecessarily and you also get to enjoy some reflections back to yourself if you break up the buying into smaller chunks. You might end up with some extra $SPHERE by doing this.
Selling is the exact reverse of buying with a little twist. You may assume that you either DCA the sells or do a huge sell order. I would guess you aren’t wrong to think that but read on. Here’s what I do.
The first option is to DCA the sells to minimize Price Impact, that is true. This keeps the price steady and you can cash out at almost the same price over time if controlled well.
But selling all at a go? That is not an option for me. You can buy at one shot, but never sell at one shot. You are shortchanging yourself by losing to Price Impact and at the same time, you are essentially giving away all your reflections at a go to every one else.
Not to mention the project has great potential to go further that just a short term punt. Have you seen their updated roadmap below? These guys deserve to go home as much as we all do. We’ve all fought hard. The project has slowly transitioned to be owned by the community and we all deserve to make it successful!
While I haven’t really sold my holdings yet. The Cronosphere team have shown that they are here to stay, long-term, in Cronos and there is simply no reason to disqualify the project unless there is a huge real life situation that demands it.
So there you have it, my short little spiel that I hope you find useful. For those who are still new to Decentalized Exchanges, stay updated and read, read, read (or watch Youtube). Lots of things to be familiar with and as we all know, knowledge is power. Times change, we need to change as well.