The Price is Set by the Traders ... not the hodlers

Wow, my Hive-Engine empire took a beating this month.

The coins on HIVE-Engine suffer a lack of liquidity. This means that, whenever there is volatility in the larger crypto market, the active traders on HIVE-Engine dump their alt-coins and the price of the alt-coins tank.

I fear that the lack of liquidity might drive investors away from Hive-Engine dooming the tribes to junk coin status.

I was of the opinion that the best way to support alt-coins was simply to stake and hodl the coins.

While hodling is a good thing, I realize that the actual price of coins is not set by the stake-hodlers. The prices are set by people who actively engage in the market. The price is set by traders, not hodlers.

During this last dip in the market I found myself asking the question: What is the best way to support the Hive tribes in a volatile crypto market?

I determined that the best approach to supporting tribes is develop a mixed strategy that combines staking and active trading.

LeoDex says that the current value of my HE account is 216 HIVE. The HIVE value of my account has been dropping fast over the last few months. I am thinking that I would like to keep from 5% to 10% of my account liquid and to use the liquid funds to place a few low-ball buys and a few high-ball sales.

Since there is a wide gap with many of the coins on Hive-Engine, the strategy is likely to have minimal losses and might even make a few coins. This gambler stake used to speculate on coins might add tiny amount of liquid HIVE used for speculation might help with the liquidity problem on HIVE engine.

Looking at the Liquidity of CENT

Currently, CENT is my best performing coin; So, I grabbed a shot of the depth chart for the CENT coin on TribalDex shown below.

The chart looks pretty. But you will notice that there very few dots on the buy side. There is currently only about 30 HIVE worth of orders on the buy side. Most of the orders are low-ball buys. A person who sold 16 HIVE worth of CENT on the market would knock the price down to 0.001.

The tokens page on Hive-Engine says that the CENT coin had only $50 in transactions in the last 24 hours.

Fortunately, CENT has several Diesel Pools on TribalDex. These pools hold several thousand dollars in liquidity. These pools make CENT one of the best financed tribes on HIVE.

BTW, if you are thinking of buying or selling coin; you should probably look at the Diesel Pools before making the order. The price of Diesel pools usually sits between the buy and sell price on the market. The diesel pools let people make bigger purchases without the price hit that incurs when trying to buy coins on market.

Diesel Pools v. the Open Market

Many of the alt-coins on Hive Engine seem to suffer from both low-volume and low liquidity.

The reason for writing this post is that I asked myself the question: What is the best way to improve liquidity of altcoins on HIVE? Is it better to buy into the diesel pools or is it better to just start actively trading HIVE coins with a series of low-ball buy orders and high-ball sell orders?

I am think that keeping some liquid HIVe on hand and actively engaging in the market is the best approach.

Posted Using LeoFinance ^Beta