Market Cap/Circulaing Supply/Token Price

The price in influenced by offer/demand relation but also from circulating supply and his dilution.
As far as I understand at the moment only 10% of the total supply is circulating and I’m wondering what are the short term plans (and the longs as well) for more diluition and who is the entity deciding for more dilution (the DAO ?).
For exemple: if the entire supply of 2 Bln of token will be all circulating and the market cap will arrive at 2 Bln $, this means, XMT price at 1$. But if most of XMT are locked means that with a small increase of the market cap the price can go much more higher than 1$.
More overe the buy back process in involded in this process and I would better undestand how much this process impacts on the circulating supply
This argument should be taken in care because if a new bull run should occur in the future + XMT tools very adopted (conservative prediction market cap around 500 mln $ ) + buy back process + low dilution, the XMT price could go very high.
I would try to calculate as many as vaiable as possible and:

  • adoption/market cap: you can estimate a faire value for similar project during the last bull run
  • buy back process: can you explain how doest it works? Should be 10% of the fees isn’t - if yes this bullet point is related to the adoption
  • circulating supply dilution (main topic of this post)
    I hope my question is clear and we can go further in this discussion. @LorenzoN

Hello @gianliuka

Excellent topic.

  • It’s indeed challenging to define a Fair Price because often tokens are driven by speculative dynamics dictated by FOMO during bull runs, which have little to do with intrinsic value.

  • The buyback system involves converting 80% of the collected fees into various assets, which are then transformed into XMT, creating a buying pressure on the token. Currently, the majority of volumes are on the Optimism chain, so the collected fees are bridged to Ethereum and exchanged on DEXs to obtain XMT. These obtained XMT are added to the SmartPool, which is why you might have noticed occasional increases in APY.

  • Yes, the basis of the reasoning is that around 10% of the supply is circulating, and a portion of it is in DEX pools, thus some supply is locked. It would be interesting to conduct an on-chain analysis for more precision, perhaps someone has already done it and will share the results. The token dilution currently is minimal and depends on Liquidity Rewards from swap openings and Liquidity Providing. The only other source of dilution is the incentive for launching the Smart Pool with 200,000 XMT and other incentives that the Foundation might decide to provide for XMT locking. These amounts are negligible compared to the circulating supply. The DAO is the entity responsible for making decisions about the XMT Distribution Plan.

So, your reasoning is correct, and the most important focus the community should and will have is on the utilization of the tool because that’s the only thing that truly matters in the long term.

I hope I have addressed your queries. I am curious to know what you think

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Many thanks for approving my post and for the reply.
If I well understand the idea from the founders is to have a “scarce asset”.

  • the elements of dilution I see are:
  1. the more Swap are opened and the more there will be Liquidity provider, more XMT will be distributed to those people, diluting the circulating supply.
  2. Incentive for Smart Pools or other initiatives decided by DAO (amounts negligible as you stated)
    This is correct?
  • element of reducing circulating supply:
  1. Buyback process - do you know if this process is more influent than the XMT token distrubution for swapper and liquidity provider? In other words, if there will be a lot of users the price will be influenced more from the buyback process or from the XMT dilution due to rewards distribution?
  2. Smart Pool Staking - this process tends to promote people to gain extra XMT in change of locking on his own tokens. These rewards comes from Swaps fees and it should not influence too much the circulating supply.

To conclude, I understand that the project has been though to have a low circulating supply and the supply will remain very limited even with a huge use of the metalswap tools.
This construction is perfect when the demand will rise again :slight_smile:

Please tell me if my thought are correct or if I miss something.

If my assumptions are corrects, do you know why a 2Bln of Max Supply have been decided if most of them probably will never circulate?

Many thanks again and great job for all of you!

@LorenzoN do you have any update about this topic :wink:

Certainly, here are some additional details following your logic:

  • Dilution

1 - The more Swaps that are opened, the more XMT will be distributed to those participants. This distribution isn’t directly correlated with an increase in Liquidity Providers.

2 - Yes, up until now, it has been the Foundation making decisions regarding these incentives. In the long run, the DAO will take on this role.

  • Reduction of supply - please note that the supply doesn’t actually decrease; it’s the circulating supply that temporarily reduces due to these mechanisms.

1 - With the insertion of 200k XMT into the Smart Pool, there are now approximately 85k XMT more than before. This increase results from over a month of substantial buybacks. From what I can observe on-chain, within the same timeframe, around 7.5k XMT have been distributed for the liquidity reward of Hedging Swaps, making it have a less significant impact compared to buybacks. At present, Liquidity Providers receive a daily distribution, considering the current liquidity of 150 XMT. This translates to roughly 6-7k over a month and a half.

2 - Precisely.

The significant supply has been set to ensure readiness for scenarios where usage volumes could be 100 or even a thousand times larger than they are now. Another use of the supply is for strategic partnerships and the token’s utilization in project development.

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