I am not entirely sure of this, if it was really me that caused it.
Coinmarketcap and Coinbase went haywire and Coinmarketcap showed Bitcoin at 1.4 trillion dollars price, just when I was running an experiment with a liquidity pool at PancakeSwap.
Liquidy pool (LP) markets
I am preparing to launch my own token. So I am scouting the scene.
The DeFi market differs from centralized orderbook exchanges. The blockchain is not built to register an orderbook with bids. For the decentralized web, the intelligentsia concocted the liquidity pool. You do not trade with peers, you trade against a couple of pooled assets with it’s own programming logic. That is an entirely different market logic. You are trading against a programmed parabolic curve.
When I launch my token, it will be on the DeFi swap market, Pancakeswap.
My first market will also use a liquidity pool. I am going to have to put my money where my mouth is, and put 10.000 dollars in a liquidity pool. That is basically my pension fund, and I am not going to put my pension money up for grabs. I want to know exactly how a liqudity pool works before I entrust my savings to it.
Get some hands on experience with an LP
I saw video’s on Youtube with difficult geek explanations, keep it simple, stupid. That is all theory, I needed a feel. I need to ‘know’ how the liquidity functions, it’s logic, it’s response patterns. And I learn a lot better with some practical hands on experience.
So I decided to observe a liquidity pool for a while. Time to get some hands on experience, how does the parabolic curve function ?
The experiment
I picked Metadoge for my studies. They only had one pool, Metadoge/BNB.
I had a theory that given a small enough pool and given a large enough order, through the ‘parabolic’ workings of the LP, it can jack the price up into the trillions of dollars.
I created the Metadoge/BUSD pool : 16 dollars in size, 8 dollars of BUSD and 8 dollars worth of Metadoge. There are very few payments on the BUSD market, so nothing much happened at first. I decided to wait what, if anything, would happen. Meantime, I was constantly copying price data from CMC. Suddenly CMC’s prices spiked into the billions and trillions. I immediately checked my micro-pool and indeed, someone just made a BUSD/Metadoge trade.
Concluding
I am not sure my micro-pool experiment blew Coinmarketcap out of the water. It could be something else that caused it. It just coincided. And if I did cause it, it just proves my theories about the liquidity pool. CMC had a good laugh at it, most people had a laugh at it. Their 100 dollar portfolio was suddenly worth 100 billion dollars, everyone made it rich for a few moments :)
If that was my experiment that caused the insane prices at CMC, it shows the Pancakeswap pool indeed has parabolic logic.
