Estimating price changes of Moons using basic AMM model

Hi guys,

The point of this post is to give you a sense of how buys and sells on Sushiswap will impact the price of Moons, and with it the market cap.

There are a lot of assumptions, which I will hopefully cover in this post. But I want to reiterate that this will not be exact due to changing market dynamics, including more people adding / removing liquidity from the pool, and also that I don't know what the initial liquidity in the pool is. Once again, this is a ROUGH estimate, but you can use it to have an idea of how price moves.

Here is a screenshot of the most relevant portion

Here is how to read the chart. The yellow line is about where we currently are.

If there is a buy order for 1 ETH that comes in, that user will get about 5,761 Moons. This will change the price from 0.302 to 0.306, a change of 1.3%. But notice how much the market cap changes? It goes from $33.1 million to $33.6 million! A $500K jump from a $1,750 buy.

This is why usually I don't pay attention to market caps. In the case of Moons, there is only so much liquidity out there, and it's really easy to influence the market cap with a relatively small amount of buys. For example, to hit a $50 million market cap, we would only need about 35 ETH of buys. $60K of buys will bump up our market cap by about $20 million!

Now back to some of the assumptions. I assume that price is constant at $1,750. This will obviously not be the case, but it makes this analysis easier. Also, as price moves further out of this range, the model will vary considerably more than the actual price moves. And also, I assumed 0 fees (0.30% actual Sushiswap fees), since fees also make the calculations more complicated.

In summary, here is how different buys / sells will affect the price of Moons. Hopefully this can help you plan your own trading.

• Buy 1 ETH of Moons = price goes up 1.3%
• Buy 5 ETH of Moons = price goes up 6.6%

• Buy 10 ETH of Moons = price goes up 13.6%

• Sell 1 ETH of Moons = price goes down 1.3%

• Sell 5 ETH of Moons = price goes down 6.6%

• Sell 10 ETH of Moons = price goes down 12.5%

One last point is that I didn't want to use this post to talk about AMM (Automated Market Makers). There are lots of great info on Youtube about AMMs, but to give a really quick summary

Generally there is a constant factor where a * b = constant X for example. And all the AMM does is rebalance a and b based on buys and sells, so that a * b will always equal X. This is a VERY simplified explanation, but it is the basis for my model.