Looking at Liquidity review - Jul 2021 - #4 by overanalyser
In July we LP’s were receiving ~ 30% income from a combination of Fees and INDEX rewards and we were spending 3,286 to secure ~$5M.
At the end of the Month, this was about 18% from Fees and 18% from Rewards. If we are targeting $15 M, and trade volume is unchanged, then fee income will Drop to ~6%. So we will need to boost the INDEX rewards to ~24% of the $15 M, so we need ~ 4x the number of rewards to give a 3x increase in liquidity. i.e. 13,144 INDEX (or 438 per day) for $15 M liquidity
Note, there are lots of assumptions:
- MVI price changed (affects liquidity AUM)
- ETH price unchanged (ditto)
- INDEX price stays at $25.
- Trade volume is unchanged
- LP’s respond to the changes in rewards (If anything, I think we have seen them pretty insensitive to the level of rewards)
If INDEX appreciates quicker than MVI or ETH, then we may well see even more LP tokens added to capture the income…
A quick spot check indicates we currently have $6 M liquidity, and INDEX rewards are paying 20% annualised @ $30, so we might get $15 M without doing a full x4.